TCS Daily

The Nature of New and Useful Things

By Michael Rosen - March 10, 2006 12:00 AM

As intellectual property (IP) attorneys, we read with interest the redoubtable Mr. Kling's recent column describing a modest proposal for reforming the U.S. patent system. His remarks demonstrate none of the self-described "amateur character," as he raises some important and interesting questions. Indeed, his remarks capture sentiments expressed by courts throughout this nation's history. Nonetheless, we think his proposal is off base and we wish to offer a competing vision of patent law and policy.

Our Constitution wisely but tersely established the fundamentals of intellectual property law in Article I, section 8, clause 8, giving Congress the authority 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 dichotomy of "Authors" and their "Writings," on the one hand, and "Inventors" and their "Discoveries," on the other, delineates the major features of the IP landscape — copyright and patents, respectively. (We in no way mean to slight trademark law here, but the issues Kling raises touch primarily on copyright and patent law.) Both exist to secure rights in otherwise intangible property; both exist to protect the creators and to benefit the public — but they do so in distinct ways.

Patents exist to provide a limited property right in new and useful things. They vest in their owners the right to exclude others from making, using, or selling (among other activities) the patented material for a limited time. In exchange for that right, the patent owner must surrender to the public a detailed description of the new and useful thing sufficient to allow a knowledgeable person ("one of ordinary skill in the art," close cousin of the law's "reasonable person") to make or use the invention. The rationale for creating this right is to spur innovation by providing exclusive incentives to innovators. The right is limited both by the requirement that the patentee put the public in possession of his or her ideas and by the time-limited nature of the right.

Copyrights exist to reward artists, composers, and authors for their contribution to the public repository of creative works. The reward to the creator is the protection from unauthorized copying of their creative work. The rationale is to give incentives to creators to pull their works out of their desk drawers and put them on display. The trade-off is similar to patents in that the creator is granted a right to prevent others from reproducing, preparing derivative works, distributing copies, or performing the copyrighted material (among other activities). In exchange, in theory, the public has access to a wider array of creative works to view, appreciate, and learn from.

A further public benefit has evolved in copyright law that does not exist in patent law — at least, not in the same way. The doctrine of "fair use" is designed to allow educators, other artists, and the general public, for example, to use a limited amount of the copyrighted creation in limited ways. For example, use of small bits of a book allow researchers, critics, and teachers to provide support for their propositions. The copyright holder retains full control over the work but the public benefits from the further ability to "handle" the creation — in a way that does not distort the work or allow another to claim credit for it.

The patent system has not developed such a mechanism. This is so in part because patents tend to deal more with the physical implementation of ideas rather than their expression. Thus, to practice a patented method or to make a patented device is to exploit the central right granted by patents. Fair use of copyrighted material, on the other hand, does not implicate the central right granted by a copyright — the exclusive use and control of the copyrighted item — as the "fair user" has merely been given limited access to portions of the item.

Furthermore, patents — unlike copyrights — already put the public in possession of the ideas embodied in the patent or the patented item. The free availability and enrichment of the public idea stock is wholly accomplished by the patent system. Others are free to use those ideas to create other new, useful things — including by "designing around" the existing, patented item. Copyright requires the fair use outlet to put the public fully in possession of (and to benefit from) the copyrighted item.

Kling's proposal misunderstands the differences between copyright and patents. Furthermore, his proposal amounts to compulsory, free licensing for certain inventions that fail to meet certain criteria. Other countries have tried compulsory licensing and have learned the anti-innovative effects of such laws. Additionally, in the U.S., the Patent Office and courts already factor in most of what he proposes.

Moreover, as an economist, Kling surely appreciates the genius of the market for determining what is worthwhile — and he must also appreciate the unpredictability of the market. Many inventions create the market which they come to dominate. The BlackBerry might be a perfect example of that. The owners of the BlackBerry idea should not be penalized for being ahead of the market. (Indeed, the feuding parties finally came to agreement late last week).

Finally, Kling aims to wipe out the rights of "mere" holders of patents, lumping together malicious extortionists with start-ups and other hopeful inventors. What he neglects is that IP revolves around rewarding people's intangible ideas; thus, aiming the patent system against holders of mere rights in ideas seems to turn the patent system against itself. Furthermore, 'holders of patents with no products' fits the description of the many start-up companies, in biotechnology for example, that have been the engines of innovation in many industries. Unequipped to handle the relentless marketing and capital demands of the massive pharmaceutical industry, these biotech start-ups are liberated by the patent system from the exigencies of the "business world" in order to focus on their area of expertise — scientific exploration and discovery.

Indeed, it is crucial not to employ hindsight, especially in evaluating patents. Of course, once something has already been invented, it's easy to see its practical implications, its marketability, its appeal, its usefulness. It is the genius of the U.S. patent system that it rewards inventors without forcing them to be fortunetellers.

There is much to reform about our patent system. More examiners, different incentives, and clearer rules would be a start. Another set of proposals comes from the experience with the human genome project. There, the balance of public and private interest and benefit — of proprietary research and academic inquiry — might offer some answers to patent reform, a current hot topic in the Congress. But in the end, we must be careful not to scrap the fundamental structure of our inventive system, the foundations supporting the most innovative society in the history of mankind.

Thomas J. Van Gilder, M.D., and Michael M. Rosen practice intellectual property law in San Diego.



Inheritance of copyrights and patents
This was an interesting column, and I'd love to see the same clarity brought to the question of inheritance and copyright or patent right. Unless there was some other clause in the constitution, it would seem to me from this column that there is no basis in the constitution for allowing things like the endless copyrights granted to the grandchildren of the creators of animated characters like Mickey Mouse.

Yes, copyrights and patents are different
Excellent rebuttal to Kling's proposal.

Limited Times & Lifetimes
Why did our Founding Fathers stipulate a 'limited time' for patent rights? Because, in order to stimulate the growth of science and the economy, the sooner an invention/discovery is made avialable for public use, the better. Typically a U.S. patent lasts 20 years from date of filing. But recent legislative acts extended the definition of 'limited time' in regards to Copyrights to absurd lengths -- and in some respects beyond the span of a lifetime.

Copyright Basics
U.S. Copyright Office, December 2004

...Under the law in effect before 1978, copyright was secured either on the date a work was published with a copyright notice or on the date of registration if the work was registered in unpublished form. In either case, the COPYRIGHT ENDURED FOR A FIRST TERM OF 28 YEARS from the date it was secured. During the last (28th) year of the first term, the copyright was eligible for renewal.

The Copyright Act of 1976 extend the renewal from 28 TO 47 years for copyrights that were subsisting on January 1, 1978, or for pre-1978 copyrights restored under the Uruguay Round Agreements Act (URAA), making these works eligible for a TOTAL TERM OF PROTECTION OF 75 YEARS.

Public Law 105-298, enacted on October 27, 1998, further extended the renewal term of copyrights still subsisting on that date by an additional 20 years, providing for a renewal term of 67 years and a TOTAL TERM OF PROTECTION OF 95 YEARS...

IP Law in General.
We all understand and respect the need for the granting, recording and enforcement of intellectual property rights as the basis for sustained innovation. However, it does seem out of control to the ordinary person. Even though I'm not inclined to agree with all of the points Kling presents- I am inclined to agree IP law has become a bludgeon to to the unsuspecting. There's something wrong when the Union Pacific Railroad reasons there is compelling cause to assume their position is enhanced or rights maintained by asserting IP rights against MODEL train manufacturers-unless they plan on developing O scale railroads, which is clearly a departure from the past.

First of all, your call for clarity is to be commended. However, what seems to be the problem, is that in spite of the Constitutional powers granted to the Congress- the "evolution" of patent law has occurred mostly in the courts and the administrative bureacracy of the USPTO. Neither of those two parts of the government have any vested interest in simplification or clarity-after all, they derive their living as the arbiters of the complex and opaque. Certainly, there's no history of advancing those objectives.

Secondly, when Congress has acted, it has done so arbitrarily and capriciously not to advance the public good, but clear benefit of a specific "special interest", the Disney empire (as a previous poster pointed out). American innovation would hardly have suffered by the passage of Steamboat Willie into the public domain. Whatever the technical deficiencies of Mr. King's arguments, it is clear why he would view "mere holders" of IP rights to be no better than extortionists.

If respect for IP rights wane, it will clearly be a reaction to the pharistical pronouncements of the IP legal community and courts, the ridiculous acquiesence of the legislative branch to an ever expanding reach of IP law and the creation of disproportionate consquences (copyright breach is bad, but it isn't murder) and the appropriation and granting of gestapo surveillance for the clear benefit of groups like the RIAA

I'm pretty sure that Mickey is a trade mark, not a copyright.

Scarcity and risk
"In exchange for that right, the patent owner must surrender to the public a detailed description of the new and useful thing sufficient to allow a knowledgeable person ("one of ordinary skill in the art," close cousin of the law's "reasonable person") to make or use the invention."

A closer cousin to "one of ordinary skill in the art" is the UCC's merchant, who "sells good of the kind in the ordinary course of business." This is the correct analogy, for it brings one directly to the crux of IP law.

Genius is very scarce. Indeed, those who can create intellectual property worth reproducing are much fewer in number than those who can reproduce intellectual property worth reproducing. Therefore, simple proportional justice as well as the economic laws of supply and demand dictate that those who own what is scarce - their own minds and the produce thereof - also own the right to a reward proportionate to the benefits arising from exchanging these with humanity.

For example, who can calculate the monetary value that Edison's light bulb has coveyed to man? Penecilin? DDT? Those economists who exaggerate the economic rewards accruing to creators who ply an invaluable commodity - genius - and discount the economic rewards accruing to the rest of us from genius are attempting to pervert the most fundamental laws of economics, thereby discrediting themselves as hacks.

Moreover, exercising genius is very risky. For when one invests one's scarce time and energy generating ideas that can't be appraised utilizing existing values, one forgoes all other things that one could have done with that time & energy, such as working as a clerk in a Swiss patent office.

Those who take great risks have earned the rewards they reap from exchanging their ideas with other men for cash. For what is of greater value than life? Certainly not ideas, as Galileo can attest.

First to Document Rightfully Controls IP Monopoly
THE NATURE OF NEW AND USEFU THINGS by Michael Rosen and Thomas J. Van Gilder, B10 10 March 2006 TCS
Great exposition by Gilder and Rosen and useful commentary by all, and thank God for Dr. Kling starting the debate. As a garden variety lawyer, engineer, contract administrator, and investor, here are my thoughts on the subject.
Ideas have consequences. All societies work hard to suppress ideas, fearing loss of power, usually monopoly power. But patents and copyrights do not suppress ideas. All are free to study IP ideas and learn from them. It is their limited time monopoly use that is controlled by the holder as a reward for creativity and to promote further creativity.
One can of course write a book, put a copyright notice on it, and file it in a drawer. But there is no fame or monetary profit in that; nor do others learn or receive encouragement. And that is the penalty for failure to publish or to register the book. If however the book is registered, there is a small chance someone will come across it and buy the copyright or fund its publication if the author so desires.
One can also invent something, with the same consequences. To the extent the invention has good monopoly and high demand potential, those who see that potential will want t to buy the patent or to pay to use it.
In this situation, we have the inventor and the investor. The investor before the fact of invention is generally the employer of the inventor. That employer may choose to put the invention in the drawer and not seek a patent, for example if the implementation of the invention would hurt the bottom line of existing or future business, something some suspect happens fairly often in the pharmaceutical and energy businesses.
The investor after the fact of invention expects to make exceptional returns for recognizing the value of the invention and for money put on the line to buy, hold, and use or market the invention to others. The investor will be alert to detect unauthorized use of the patent, as should the unauthorized user, who should be prepared to pay after the fact for its use. This intentional or reckless or ignorant disregard use may be a good tactic where upfront costs are unaffordable or where there is a chance of using the patented ideas to run up huge profits and build name recognition and reputation without undue consequences if the patent holder brings the infringer to court. The infringers in any event make and are able to legally keep a lot of money in the meantime, witness OJ and Florida and Texas bankruptcy laws.
The original inventor may not want to go through all this. He is an inventor, not like Edison an inventor, investor, businessman, litigator, and manufacturer all rolled into one. He may not want to exploit his invention. If the purpose of the patent law is to be realized, then others must be able and willing to do so.
If a patent lies fallow, it may well be because investors are unable to see sufficient demand for it. That some would like to use a patent free of charge is evidence that it does have at least some value and the user ought to be willing to pay for it. Hungry patent holders can license use of the patent cheaply under threat of litigation they cannot afford if they don’t. Infringers can assess the danger that IP investors will challenge them.
The major problem with Dr. Kling’s “fair use” doctrine is that with some deeply creative people just being told by another of the problem the other has worked on for some time and is unable to solve calls forth a solution. Once the problem is explained to some people, a solution is immediately or soon thereafter forthcoming. In a bull session, someone in particular solves the problem, not the group as a whole, although the group’s presentation and discussion of the problem were necessary to frame the problem and bring forth its solution.
What Dr. Kling is proposing is that smaller or even no rewards be given for either quickly solved problems or those that are easily implemented. It does not further invention that ideas be hard to come by and their implementation long and exasperating to deserve patent protection, although it would certainly further complex litigation. Necessity is indeed the mother of invention. People often solve problems within days of each other. This is why time of recording is so important. The rewards go not to the swiftest to create but to the swiftest to document. Further, many solutions seem obvious in hindsight because new connections are very hard for most to make.
Inventors make connections others do not see. The time it takes to make the connections should not be a measure of its patentability if inventions are to be encouraged. If in implementing the inventor’s idea new problems arise, than these in turn may generate other patentable ideas, or just may be resolved by applying familiar and relatively obvious methods and ideas. Either way the worth of the original invention is not diminished.

Actually, Mickey is covered by both copyright and trademark. Trademark rights never expire (unless abandoned or become generic), but do not protect the same material as copyright. For example, just having a trademark in Mickey Mouse would not prevent others from copying a specific Mickey Mouse cartoon, or creating their own. In fact, Disney was a primary pusher for extending the copyright term, so that they did NOT lose the Mickey copyrights.


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