Details of Abundance Based Intellectual Property System
My article Abundance Based Intellectual Property System is being discussed at TechDirt. The fundamental point is that R&D is different from manufacturing and marketing. For a system to promote innovation it must reward those two different tasks separately. And the best system aligns all parties instead of pitting them against each other.
Unfortunately the fundamental point of my article was missed. The choice of headline, “Compulsory Licensing Rather Than Artificial Monopolies?” , suggests the exact opposite of what I said and in fact was self contradictory. The existing artificial monopoly patent system is compulsory licensing. The current patent system says, “if you want to use my patent you must pay me first.” Under the system I suggested you are free to use any idea, if you make money, a portion of those profits go to the inventor. And better yet, if you don’t make a profit you pay nothing.
The intelligent readers had positive things to say and even pointed out prior successful use of the concept, Royal Commission for Awards for Inventors.
I have not performed a complete Predictive Innovation® analysis to determine if this system is the best. Like any system it will have advantages and disadvantages. The key point is, does this new system work better than the existing system, and can it be implemented with minimal disruption? I believe it does.
Going step-by-step through how I arrived at the idea might help readers to understand it better. At the very least you will learn how to innovate better.
Existing environment (Resources for innovation)
- Government already collects income taxes
- Courts already handle IP disputes
- IP attorneys already handle disputes in court
- Inventors already must vigorously monitor use of their ideas
- Patent office already publishes claims of first invention
- Manufactures and marketers already use existing ideas
Problems with current system
- Current system can be used to block use of an idea
- Trying to sell your idea gives it to the people most likely and able to steal it
- Inventors are at a disadvantage to license patents to established businesses who have financial resources to fight inventors in court.
- Current IP law pits inventors against manufactures and marketers, they are in a win-lose relationship.
- Current system encourages per item fees. That forces a minimum cost per unit which can limit the market.
How would the new system work?
Some percentage of corporate income taxes would be dedicated to paying inventors. The percentage of the income tax devoted to intellectual property would reflect the value government puts on R&D. Inventors claim a share of the percentage of the income tax collected.
Reward / royalty fund
A fund is created from the R&D portion of the income taxes collected. This fund is segregated by company, much like social security records. Money in this fund would stay there for a fixed time to be claimed by inventors. The fund would require minimal expense since it would basically be bank accounts that each business deposits money into when they pay their income taxes. In this way it could be possible to do the same thing completely voluntarily.
Money would sit in the fund waiting for an inventor to claim a portion. After a period of time unclaimed funds could be directed to X-Prize type systems or available as grants to conduct research similar to the National Science Foundation (NSF) or perhaps scholarships. This way the money is always used to encourage innovation.
Receiving reward / royalty
For an inventor to be eligible he would need to have a patent on file for his invention for the years covered. The inventor would file a claim with the patent fund administration office who would determine the eligibility of the claim. Each year the fund would be divided between all eligible claims.
This would automatically handle improvements to existing patents. It would also limit the time of patent claims. If you fail to make your claim in a timely fashion you lose your reward. Attorneys who already monitor patents and make infringement claims could focus their attention on collecting royalties for inventors. This would be the same as other unclaimed money services where the attorney collects a percentage of recovered money for the service of telling the rightful owners of their claim and filing the paperwork.
How well does this solve existing problems?
- Current system can be used to block use of an idea. Solved
- Trying to sell your idea gives it to the people most likely and able to steal it. Solved
- Inventors are at a disadvantage to license patents to established businesses who have financial resources to fight inventors in court. Solved
- Current IP law pits inventors against manufactures and marketers, they are in a win-lose relationship. Solved
- Current system encourages per item fees causing barriers to entry and inflating prices. Solved
- Avoid disruption. Yes This system could be implemented in parallel to the existing monopoly approach. States could even do it within the USA.
Possible variations
- Patent filing fees could be taken out of future royalties thus lowering the barrier to inventors to receive patents.
- Patent life limits, probably best starting from first date of claiming royalties
- Single license fee. Inventors would still have an incentive to monitor usage of their patent. This system would impose a barrier to entry and encourage users to hide their usage.
- Voluntary R&D donations could be a tax deduction or tax credit allowing businesses to target the area they want to fund.
- Entire system could be voluntary through IP co-operatives. All members contribute to the fund and can freely use all IP in the shared library.
- Publish the amounts of royalties paid and list recipients as a way to encourage others to participate and to promote openness.
- Since the entire system is based on recognition instead of exclusive right, it would be possible publish all patent applications for peer-review thus reducing any bottlenecks on the process caused by the need for government employed patent investigators.
- System could be used for patents or copyrighted material.
- Filing could be heavily automated. A public web site with a time stamp could be used. This would rapidly notify manufacturers of possible innovations helping to bring those innovations to market more quickly.
Potential Disadvantages
- Inventors would have to deal with government bureaucracy to receive their royalties. This does limit the courses of redress however there is not much incentive other than outright corruption or laziness to deny an inventors claims. Since royalties are capped by the tax rate there are automatic limits on backroom deals. Also by publishing the recipients names and the total amounts distributed it would empower inventors to file appeals. This could lead to excess litigation but that could be limited.
- Money passing through government hands would detract from amounts received by inventors. Inventors who were able to negotiate deals might lose some of their total royalties with this system. Although it would be greatly streamlined and empower more inventors to get paid. Inventors who are able to negotiate deals could find alternative ways to market their talents directly to manufactures and marketers.
- Flood patent applications. This system would encourage filing more patents, however it would primarily encourage profitable patents and those profits would be available to the patent office to hire more investigators.
- Dilution of royalties from excessive patents. This could be limited with filing fees or time limits . Old patents expire removing them from eligibility for sharing rewards.
- Encourages excessively broad patents. This could be controlled by review of the original applications for patents and by reviewers of claims for shares. This is a potentially significant weakness because real innovators could lose income to professional application filers. One way to remedy this is for users of patents to record which patent they are using and receive a tax credit or other incentive such as the ability to direct a portion of their royalties to chosen fields.
Questions and Answers
Q. If you have an idea, are you immediately required to license it?
A. No. You can keep your idea secret as long as you wish. If someone else publishes it first you will not be able to claim a share of the royalties. You have an incentive to publish but no requirement. Additionally, you can use any idea regardless of who has a patent and your cost is nothing. Royalties are taken out of existing corporate income taxes.
Q. How do you allocate the value of a license if you have hundreds of licenses on an end product? Define fair use in this system.
A. There is no such thing as a license, all ideas are free to use so any use is fair. A fixed percentage of income would be dedicated to rewarding inventors/artists, or perhaps copyright holders. Users would not care about allocating value. Rights holders would make claims against the fixed percentage of fund dedicated to royalties.
Q. How do I even know I need a license for my product because it uses an general and/or obvious idea ?
A. You would never need a license.
Q. Why bring the government into what is already insanely complicated?
A. The government is already involved. It grants patents. Courts decide claims. The government taxes businesses. The current system is complex because all parties are fighting each other. This new system would realign the goals of everyone to be in the same direction. All parties including: inventors, businesses, charities, customers and government; benefit from better and more profitable innovation.
Q. How does the system solve simultaneous and/or independent invention, obviousness, and first-to-the-patent-office?
A. Simultaneous and independent invention would both be treated the same. There is a benefit to being first to the patent office, however there is no need for such a strict first claim. Since the royalty is divided equally between all valid claimants, applications for patents could be grouped by month or even year. Automated public submission and review system could handle timestamps.
Being first would be encouraged and not being first would no longer be a punishment. If you intend to use the idea you don’t need to be first to avoid being blocked. The goal is to make and publish discoveries. That benefits everyone.
Obviousness would hopefully be excluded by the original patent review process. Even if obvious ideas did receive a patent there would be no harm to businesses as is caused by patents on obvious ideas under the current system. Patent Trolls could file patents on obvious ideas and if granted would be eligible for a share of the royalties but could not block use or prevent real inventors from being paid. The new system does not stop this abuse but it does limit it better than the current system.
Summary
This system changes an artificial scarcity intellectual property system to an abundance oriented recognition for innovation system.
Please leave comments. I encourage people to point out potential flaws and enhancements. Please share this article. I’m very interested in presenting this and other ideas to governments and other organizations for use in an overall innovation policy.
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I like the new proposal over the older one. I would also like to see this developed with as much detail and analysis as possible, a bill drafted, and a list of influential individuals signing on.
There are many details to be filled in.
I expect a lot of large corporations will not like this. One has to wonder why something like this has not been established already, but things like software patents might end up being the catalyst.