From: Peter C. McCluskey (pcm@rahul.net)
Date: Thu Mar 13 2003 - 15:40:47 MST
hal@finney.org (Hal Finney) writes:
>One of the problems with homesteading in the United States was an instance
>of what is called rent-seeking. Settlers would occupy land prematurely,
>before it was economically ripe to do so. They would live on the land
>at a loss for a number of years in the expectation that as civilization
>developed in the area, the land would eventually become valuable.
>But all those years of losses were wasted economic effort that could
>have been put to better use. In fact the waste can be so great as to
>dissipate all the future value of the land.
This is well understood as a theory, but is there much evidence that it
has happened with land? De Soto (in The Mystery of Capitalism) claims
that homesteading laws generally recognized the claims of people who
had been living on the land, and provided much less opportunity for
new settlements that is commonly claimed.
>Patents might see some of the same problem - people rush to get patents
>even when they don't make that much economic sense. The limited term
>of patents will help to avoid waste, but some still does occur.
This might be a problem in a few areas, such as patents on genes, but
it's hard to see signs that this is a widespread problem.
>I think another of the big problems with patents is that most are not well
>managed. The transaction costs to negotiate a license are extremely high.
>How many here who have faced a problem due to a patent have seriously
>considered trying to negotiate a license? Each such failure is a lost
>opportunity for the patent holder.
This is a much bigger problem. I think many of the problems are inherent
in negotiations involving a monopoly, unless there are a large number of
customers (see http://www.daviddfriedman.com/Academic/Bilateral_Monopoly_%C4/Bilateral_Monopoly.html
for an explanation of some of the problems).
>I foresee a day when every patent will have a link you can click on to
>license it. As the internet works to drive down transaction costs in
>all other areas, it will facilitate patent licensing as well. This might
This might work well in a few areas where work well, but it requires that
there be a well-defined quantity being licensed. A drug company might
license the right to manufacture X molecules of a drug, with only some
enforcement problems (which I suspect are big enough to make many drug
companies unwilling to sell licenses at a reasonable price). But what is
the unit of use being sold when Barnes & Noble wants the one-click patent?
What about when I want permission to use the RSA patent in a program I'm
going to release under an open source license? What about an algorithm
I'm going to use once in a key step while developing a program that passes
the Turing test, but I can then make billions off of the program without
any further need to infringe on the patent? Or what if I think there's
a 1% chance that the algorithm will allow me to develop such a program,
and the patent holder developed the algorithm in order to make money off
of AI programs? Is the patent holder going to believe my 1% estimate for
my chances of success, or will he set his price based on his own estimate
and ignore the chance that he could make a few million by pricing it so
that someone with my assumptions will buy it?
I first ran across a minor version of this problem while working for
a company that made vibration control systems that included a computer.
The competitor who owned some relevant patents sold systems with a
dedicated computer built into the hardware. We allowed our customers to
buy our system without a computer and supply their own PC. This led to
some disputes over what the total sales price used in computing the
royalties should be.
-- ------------------------------------------------------------------------------ Peter McCluskey | http://www.rahul.net/pcm |
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