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From my comment on Jeff Tucker’s post, A Theory of Open:

Jeff: “Mainly, I think, this comes from an exaggerated reliance on IP and a belief that it is the key to success.”

MIchael: “Do IP advocates understand that the system may very well make it a better bet to produce patents than products? Why go through the hassle of producing products for finicky customers when you can wait for someone to go through the trouble of making a successful product and threaten to sue them?”

I am not sure if non-practitioners realize exactly what goes on in patenting. Quite often medium to large sized companies hold “patent mining” sessions. They are usually not trying to come up with ideas that they might use in their business. What you do is you get 5-10 engineers to sit around a coffee table, and they are led by a “facilitor” (often a patent attorney). They talk about what they’ve been working on, and try to find little twists or aspects of a design that they can file a patent on. Or, they’ll sift thru a bunch of patents in an area that competitors are practicing in, and just brainstorm, thinking of things they can file patents on. Not because they intend to use these ideas. But just to build up a thicket of patents that they can use against another company, either defensively (i.e., a countersuit if the competitor sues them); or to extract royalties or to squelch competition.

For example, the attorney shows a powerpoint with diagrams from a bunch of patents or product designs. The engineers throw ideas out there. Most of them are ridiculous. Someone is taking notes. One of them might say, “How about if we had two channels of information there, in parallel, instead of one? Do you think competitor B might some day do that? After all, dual-channels are becoming popular right now; they’ll probably have to do this some day.” The patent attorney says, “Say that sounds alright. What’s your name? Bob? Okay, you’re ‘an inventor’. Anyone else contribute to this? Jim, didn’t I hear you say something like, ‘yeah, that might work?’ Okay, you’re the second inventor. Let’s file a patent on this puppy. You each get a $3,000 bonus.”

So, for about 3 minutes of brainstorming, a patent emerges. Maybe a dozen patent applications are filed from that meeting. These are not flashes of genius. They are not sweat of the brow. It’s just a bunch of engineers torn away from their actual design work to brainstorm ways to hamper their competition. So maybe half the patents are abandoned half-way through “prosecution,” a couple years later, after it’s clear even to the bumbling patent office that they are sh*t. Of course about $20-30k was spent on each of the now-abandoned applications, or about $150k. No matter. PTO employees and patent lawyers have to put food on the table.

The other half might finally issue as patents. Most or all of them are probably sh*t too, but now they are issued, and have a “presumption of validity.” Now we’re up to $30-40k or so per issued patent. Got to recoup those expenses and justify the patent budget, eh? And say, it sure looks like company B’s products are … kinda close to the claims in 2 or 3 of the patents. Let’s send them a friendly cease and desist letter.

Company B’s patent attorney is then called into action. He’s hired to draft 3 or 4 “non-infringement opinions” for, say, $30k each. Why? Just in case B is sued, and loses… so that they can at least plead that the infringement was not “wilful”. They still have to pay damages (or stop selling the accused product), but it won’t be trebled… if the judge believes the opinions were “sincere” and “relied on” by the defendant so that, although they were infringing, it was not “wilful” since they were after all following a lawyer’s advice.. .the lawyer they paid $120k to tell them that … they are not infringing … even though it later turned out that they were. No matter, The $6 million B has to pay in damages is at least not trebled $18 million, so that the measly $120k spent on the patent opinions, plus the $1 million spent on patent litigators, was well worth the $12 million saved! B is better off (well, except for the $6 million verdict), its patent attorneys are better off. As for the patentee company, well, their few hundred grand in patent acquisition fees yielded them $6 million, and reduced competition! A win for everyone… right?

This abomination is what pro-patent libertarians thing is just? They think this is compatible with rights and liberty? They think this is productive, innovative behavior? Give me a break.

Update: From comments on AM cross-post:

[Comment at 01/10/2010 07:04 AM by Stephan Kinsella]

[Comment at 01/10/2010 09:05 PM by Stephan Kinsella]

[Comment at 01/17/2010 10:17 AM by Stephan Kinsella]

In my post above, I tried to just mention one aspect of the real patent system–to show that it’s not this idealized system that laymen are led to believe. They–and many libertarian IP advocates–have this romanticized notion of the patent system. They think of it as the just reward given to the diligent inventor toiling away for years to produce some amazing, insightful, flash-of-genius, clever contraption that we would not have without his effort. And yet, as noted above, probably less than 1% of all issued patents even remotely qualify for being classified as this type of invention. The vast majority of patents are junk of one type or another: they are trivial; or obvious if we could only find enough art (or if the examiners were competent; or the standards for obviousness were objective); or duplicative; or represent innovations that already exist, or that others “skilled in the art” would come up with in the course of designing products that meet current market demands. This whole patent system is nothing but a mercantilist grant of monopolies that saps and transfers and destroys wealth for the benefit of privileged classes, and is tolerated by the masses because they do not understand the system and place unjustified trust the power-regime elite.

So a few patent agents and attorneys weigh in (also on facebook here), not to mention shills like Gene Quinn and Dale Halling, with either cruddy arguments (Halling and Quinn) or irrelevant, off-topic points. They say that I am wrong to imply that there are patent mining sessions, junk patents, etc.–oh no, why, a search has to be done and a careful review by the attorney. When I say no, searches are not always done, they claim that it’s routine and “old school,” to imply that I’m lying or don’t know what I’m talking about. They assert that it’s good practice (which I never denied) and that I must now know this. I usually do searches; in my practice I recommended them often esp. in the case of an independent or small inventor. But I have been around enough to know it’s not always done and while some companies do it routintely others have a policy against it. Some small-time or part-time practitioners who have only represented a few small clients or worked at one company that happened to emphasize searching might not be aware that it’s not always done that way; but all this is irrelevant. The system permits it; searching is not always done; and patent attorneys howl with outrage at proposals to require searches. And even if they were required it would not improve quality overmuch.

They imply that they have never heard of these patent mining sessions I speak of. Gasp, it’s just not done! Nonsense. Many companies push inventors to submit disclosures–they pay them thousands of dollars in bonuses to incentivize this–and for many of companies it is, at least in part, at least a numbers game. It is very common for a weak application to be filed just to see if even a narrow patent is issued–hey, maybe it’ll slip by the examiner. And it “counts” as another patent on our stack, don’t it? We all know that the patent standards of obviousness and novelty are ambiguous, non-objective and vague; that it’s not possible to be sure you have found all the relevant prior art; that the PTO is just an incompetent government bureaucracy (in fact it’s widely observed among patent lawyers in the US that the European patent examining corps. is (for some reason–maybe because it’s in Germany) much more competent than the US one).

As for the ridiculous contention that patent mining sessions as I describe are the stuff of fantasy–I’m loath to have to even go through the tedious work of demonstrating what is widely known in the patent bar but, sigh, okay. Here are just a few I dug up with easy searching in my own files.

Take for example a patent strategy book I have, Stephen Glazier’s Patent Strategies for Business (I have an earlier edition; the current one is here). Just skimming its table of contents gives one a taste of the wide variety of strategies companies and their patent professionals engage in–most of them are quite obviously market distorting, protectionist, extortionist, and so on.

For example, Chapter 1 lists “Five goals of patents”:

1. Protection of a Company’s Products, Services, and Income
2. Generating Cash by Licensing Patent Rights to Others
3. Obtaining a Legitimate Monopoly for Future Exploitation
4. Protecting Research and Development Investments
5. Creating Bargaining Chips

Chapter 3 is “Invent Around your Competitor’s Patent (and the Antitode), and Other Patent Strategies”, and covers, inter alia,

• The Picket Fence Strategy
• The Toll Gate Strategy
• The Submarine Strategy: Old and New
• How to Submarine a Picket Fence
• The Counter-Attack Strategy
• The Stealth Counter-Attack
• The Cut Your Exposure Strategy
• The Bargaining Chip Strategy

Chapter for teaches you how to “Prevent Product Re-Use With Patents,” and Chapter 7 has topics such as “Three Practical Tips: 1. A competitive Advantage” and “Due Diligence as Industrial Espionage.” Chapter 9 discusses “Patent Litigation As A Business Tool.”

Do these corporate shenanigans sound like the kind of creative, innovative activity most people have in mind when they think of the patent system?

And of course there are various methods companies employ to drum up invention disclosures. From p. 3:

A Nine Step ProgramDeveloping a strategic intellectual property management program can be accomplished in nine basic steps. The following discussion focuses on patents, but analogous steps apply to copyrihts, trade secrets, confidential information, and trademarks.

1. Obtain Disclosure of Inventions. One effective way for some companies to encourage employees or consultants tp disclose their ideas for inventions is to offer a program of cash incentives. This is typically a one-time paymetn or a regularly paid percentage of the income resulting from an invention. In some companies, patent disclosure forms are distributed periodically as a way of soliciting useful ideas regarding inventions.

Another effective method has been for patent counsel to meet with a company’s technical people to ferret out together innovations that may yield patents of value in the marketplace. It can be particularly useful to do this with a focus on a new product or service just before its market introduction. With companies with a particular intense product development schedule, scheduling regular monthly meetings of the sort can yield good results in identifiying important opportunities.

Glazier’s advice is very good–he is talking about how to exploit, use, and navigate this artificial, state-created mercantilist system.

Such techniques and strategies are widespread. That’s one reason companies have in-house patent departments and hire outside patent law firms. For example, one presentation of services a patent firm was pitching to me included:

Recommended patent strategy:

• Analyze current/future business directions
• Identify targets
• Identify defensive risks
• Develop patent portfolio management strategy aligned with business strategy
• Tune your claim drafting strategy to your business objectives

Another part of their presentation, on “Harvesting and Mining Invention Disclosures,” listed these services:

Harvesting

• Train management and engineers with written materials
• Lead Blue Sky and disclosure harvesting sessions

Another service is “Portfolio Analysis For Licensing/Assertion

“.

Another patent attorney I know of has what he calls a “market-domination approach to patent law”.

Another book is Strategic Patenting, by Robert Fish (I have the pre-publication version): it covers topics such as

I. B) Cost-Effective Patenting Produces The Broadest And Strongest Patents. (1) Focus On Patenting As A Critical Component In Defining Goals And Resources.(2) Choose The Market With Patentability In Mind [NSK: obvious market distortion caused by the patent system]

(3) Target Patent Strategies To The Choke Points [NSK: protectionism…]

As for ginning up invention disclosures, the book has this section:

II. B) Gathering Information • (1) Invention Disclosure Forms (Memos of Invention) • (2) Information Gathering Discussions

Some elaboration from the text (of my draft copy):

(1) Information Gathering DiscussionsThe lazy-man’s way of drafting a patent application is to have the inventor draft a lengthy disclosure, and then beef up the disclosure with a few claims. Don’t do that. That process almost always results in bad patents.

The better practice is for the patent attorney to (a) discuss preferred embodiments with the inventor in considerable depth, and then (b) go on to brainstorm alternative embodiments with the inventor. My experience is that the patent attorney should obtain a brief understanding of what the inventor thinks he invented, conduct a search of the field, and then have a lengthy discussion with the inventor to identify the scope of the invention. Shorter discussions can then be used as follow up on particular points. The lengthy discussion is usually needed because it takes awhile, sometimes an hour or more, to guide the inventor into a mental state where he is focusing on possibilities rather than preferences and actual embodiments.

The process can be rather uncomfortable for inventors. It is difficult to get the inventors to help us brainstorm the outer edge of the invention. They typically say “this is what I have invented,” and hold up their drawings or model of a preferred embodiment. When I ask how the embodiment differs from what is known in the field, they usually say that it is unique – that no one else has solved the problem in the same way they have. Well that doesn’t help us at all. I can’t claim a “unique” device. I need to know how the device is unique. I need to identify what is the smallest subset of elements that distinguishes what the inventor thinks is his invention from the prior art.

One strategy I have employed successfully with research companies is to gather together several researchers in a room for a morning, afternoon, or even an entire day. I start the meeting by identifying problems in a field of interest, and then take suggestions on what is needed in that field. To focus the group on an interpersonal level, it is usually very helpful to have a marketing person in the room, and engage the researchers in a tête-à-tête with the marketing person. The goal is to stimulate thought on what can be claimed in a patent application that would provide the company with a competitive advantage, and then work backwards to figure how those goals can be accomplished. Typically the problems are quite difficult to solve, and the solutions proffered at the meeting are only minimally practical. But I try to classify the solutions in some manner, and then figure out how to describe the classes of solutions. As long as I can conceptualize one member of a class of solutions, I can usually claim the entire class. I then go back to the office, run patentability searches on the classes of solutions, and begin drafting claims. If the claims seem broadly patentable, and useful to the company, I then go back and work with the inventors to run experiments that provide examples that support the broad claims. A good meeting usually produces half a dozen or more patentable inventions.

Yep–inventions created during the meeting, on paper only. No working models, etc. N.B., I am not criticizing Fish at all; his advice is professional and competent. These are rational responses and ways to navigate the system Congress and its corporate allies have foisted on us.

And here are some routine comments I found in some patent mining materials I have, in a book review:

“Whether patented ideas will ultimately help or hinder innovation is still under debate (see Owning the Future).In Rembrandts in the Attic, however, authors Kevin Rivette and David Kline get down to business, offering practical advice for competing in today’s intellectual property arena.

Their advice ranges from the simple to the sublime. First, they suggest, take stock of the patents you already own. Many companies are sitting on unused patents that could be worth millions. For example, IBM licensed its unused patents in 1990, and saw its royalties jump from $30 million a year to more than $1 billion in 1999, providing over one-ninth of its yearly pretax profits. And if you can’t find buyers for your unused patents, then look for companies that are infringing upon them–companies that might owe you a piece of their profits. Rivette and Kline offer “patent mining” techniques to spot such potential infringers that can also reveal where your competitors are headed and help you get there before they do. Overall, Rembrandts in the Attic is a crafty and practical guide for companies that may have untapped riches in storage. –Demian McLean

Fish’s book also goes into other strategies:

(1) Choose The Market With Patentability In MindA thorough goals/resources analysis invariably leads to a number of different markets that can be attacked. The question is, which ones should be chosen and which ones passed up. Here it is useful to map out potential growth of different markets with respect to the degree of patent protection available. In the chart below growth is mapped against patentability. The best markets are those that have both high growth and are open to patentable subject matter. High growth markets where there is little chance of securing broad patent protection will likely be inundated with competition. An example might be the wheelchair market. There will certainly be an increase in market as the population ages, but there are relatively few patentable improvements that are likely in that field. Unless there are other barriers to entry, the product will be subject to commoditization, and the margins will be weak. Markets where broad patents are likely, but have little chance of growth, will have good margins but weak sales. In this category I might find an invention that helps window washers handle work in high rise buildings. No matter how great the invention is, the market is likely to be extremely limited.

Figure 11 Choosing The Market Based On Growth And Patentability

(2) Target Patent Strategies To The Choke Points

Once a market is selected, the next step is to figure out where the choke points lie. Consider the market below, in which there are four dominant technologies, A-D. Here a contemplated patent portfolio would effectively block or render technologies A and C obsolete, but have no effect on technology B. Technology D is also blocked, but a derivative technology circumvents the patent. This market is probably a poor prospect for a new entrant. The contemplated patent portfolio, even if it could be obtained, would fail to secure a dominant position for the patent holder.

All of this, of course, harkens back to the original goals with respect to dominance in the market. An applicant can be very successful being niche or merely significant player.

Figure 12 Target Patent Strategies Based On Choke Points

The patent system encourages companies to seek state-granted monopolistic protectionism.

Again, such strategies are common. How patent practitioners can deny all this with a straight face is beyond me. From the table of contents of another book on my shelf, “Strategic Patent Planning for Software Companies: A Look at Some Current Patent and Licensing Strategies at Both Ends of the Software Spectrum: Microsoft and Apache,” by Eric Stasik (2004), for example:

The Strategic Patenting Objectives of Software Companies3.1 The Business Needs of Software Companies

---

3.1.1 Technology Exchange

---

3.1.2 Near-Term Competitive Protection

---

3.1.3 Litigation Avoidance

---

3.1.5 Royalty Income

---

3.1.6 Out-License Technology to non-Competitors

---

3.1.7 Acquire Complementary Technology from non-Competitors

---

3.1.8 Minimize Royalty Payments to non-Competitors

---

3.1.9 Product Clearance

---

3.1.10 Promulgate Open Standards

---

3.1.11 Promote Interoperability

---

3.1.12 Deter the Development of Alternative Technologies

---

3.1.13 Strengthened Position in VAR and OEM agreements

---

3.1.14 Preserving Future Options

Again, we see what the patent system is really for: it’s protectionisn; it’s to generate income, by extorting it from other companies by the threat of litigation; it’s to cross-license with other big companies: the cost is the patent attorney fees they have to pay to acquire their patent arsenal, but the advantage is the erection of a huge barrier to entry because small and new players have little defense against the patent threats.

[AM]

LSU Law Professor Saúl Litvinoff passed away yesterday. As noted in the LSU Law Center press release about this, Litvinoff was a true giant in the field of civil law scholarship.

Professor Emeritus and Boyd Professor of Law Saúl Litvinoff, whose impact on the legal traditions of Louisiana spanned more than 43 years, died earlier today. [continue reading…]

A friend of mine is going to be a panelist at this event, World’s Fair Use Day, which

is a free, all-day celebration of the doctrine of fair use: the legal right that allows innovators and creators to make particular uses of copyrighted materials. WFUD will take place at the Newseum in Washington D.C. on Tuesday January 12, 2010, and will be organized by Public Knowledge (PK), a Washington D.C.-based non-profit, consumer-advocacy group. PK works to ensure that communications and intellectual property policies encourage creativity, further free expression and discourse and provide universal access to knowledge. As part of its campaign to return balance to copyright law, PK hopes to use WFUD to educate the public about the importance of fair use in an information society.

Enhancing the fair use exception is all to the good, but it does not go far enough. Fair use is a vague, ad hoc, utilitarian legislative exception designed to blunt some of the edges of copyright law so as to help masque its manifest injustice. An analog would be a slavery law that permitted a judge to allow the slave a month of temporary freedom if he can demonstrate to the judge that his master has been mistreating him according to a balance test in which the judge weighs four “factors” to make this determination. Or an exception to tax law that says a judge can reduce your tax rate by 1% for one year, if you can persuade him of a “hardship” as proved by weighing four legislatively enshrined “factors.” If the law is unjust and needs its edges blunted by ad hoc, unprincipled exceptions–the law itself is the problem and should be abolished.

This event is produced by the group Public Knowledge, which appears to be generally IP-skeptical (“Our first priority is promote innovation and the rights of consumers, while working to stop any bad legislation from passing that would slow technology innovation, shrink the public domain, or prevent fair use”; and they seem to be appropriately skeptical of the horrible DMCA), although their approach is somewhat ad hoc and unprincipled, and intermixed with the standard pro-democracy (and pro-Democrat), pro-“consumer,” pro-network neutrality (see my A Libertarian Take on Net Neutrality) sentiments, and so on. Still, another ally in the fight against pattern privilege and intellectual monopoly.

[Mises, AM]

• See also, on the impossibility of “owning ideas.”

From Mises blog and Against Monopoly. Archived comments below.

See also Stephan Kinsella, “Ideas are Free: The Case Against Intellectual Property: or, How Libertarians Went Wrong“; idem, “Law and Intellectual Property in a Stateless Society,” in Legal Foundations of a Free Society (Houston, Texas: Papinian Press, 2023), Part III.D;  idem, “Against Intellectual Property After Twenty Years,” in Legal Foundations of a Free Society, Part IV.E; idem, “Intellectual Freedom and Learning versus Patent and Copyright,” Economic Notes No. 113 (Libertarian Alliance, Jan. 18, 2011).

***

There are various ways to explain what is wrong with IP. You can explain that IP requires a state, and legislation, which are both necessarily illegitimate. You can point out that there is no proof that IP increases innovation, much less adds “net value” to society. You can note that IP grants rights in non-scarce things, which rights are necessarily enforced by physical force, against physical, scarce things, thus supplanting already-existing rights in scarce resources. (See, e.g., my Against Intellectual Property, “The Case Against IP: A Concise Guide,” Mises Daily (Sept. 4, 2009) (comments on Mises blog archived here) and other material here.)

Another way, I think, to see the error in treating information, ideas, patterns as ownable property is to consider IP in the context of the structure of human action. Mises explains in his wonderful book Ultimate Foundations of Economic Science that “To act means: to strive after ends, that is, to choose a goal and to resort to means in order to attain the goal sought.” Or, as Pat Tinsley and I noted in “Causation and Aggression,” “Action is an individual’s intentional intervention in the physical world, via certain selected means, with the purpose of attaining a state of affairs that is preferable to the conditions that would prevail in the absence of the action.” [continue reading…]

Bilateral Investment Treaties: Investors and Property versus the State

from LRC 2003:

Punishing Politicians

from LRC 2003

Breakin’ the Law

from LRC 2003

Poodles Bite

[An edited version of an email I prepared and sent to friends shortly after Christmas, 1998. Before 9/11/2001, when the world was still innocent. Sigh.]

So our Cocker Spaniel, Muffy (yeah, that’s her name, what of it?), kicks the bucket a couple years ago [around 1996], when we lived in Philly. Cin loved that dog, I gave her to her back in college, in 1989, as a present. We buried her in Great Valley Pet Cemetary. Putting the rose in her little paws was too much to bear. I paid $400 for the hole in the ground but I was not gonna shell out $400 more for a coffin. Nosirree. I’m not some stupid, soft, manipulable yuppie. In fact, I insisted on carrying her out of the vet’s office, after they had to put her to sleep, in the black Hefty bag I had brought along to protect the car seats on the way to the pet graveyard. It was a pitiful scene, as wife and I walked out in tears, with our poor dead Cocker (nestled in a Hefty bag) in my arms. We made such a commotion and upset the other patrons waiting to get FiFi’s annual shots, that they didn’t even make us pay for the euthanasia (ohhhhh, but someday, I tell you, SOME DAY, we will pay for all those youths in Asia). I showed them. Or maybe, they were content with the $1300 we had shelled out the preceding 6 days on ultimately ineffectual Cocker Spaniel dialysis treatment. [continue reading…]

From LRC 2003

Anna Belle (da poodle) ‘n Me

Anna Belle (da poodle) ‘n Me

[From about February 1999]

So the other day, Cin’s sister Amy and her family were visiting. On a fine Saturday morning, I decide to take my 6-year-old nephew, Thomas, and our standard poodles Sophie & Anna Belle for a walk to a park a few blocks fom our house. Well, I had to walk the dogs anyway, and it was an excuse to have a cigar. And I get brownie points w/ the wife and sister-in-law because it looks like I’m bonding with my nephew at the same time. A win-win. Also have a coffee travel mug full of beer–don’t want my WASP neighbors to sneer at me. Or my wife and sister-in-law. After all, this is like 10:30 in the morning. Multitasking, man. Made cell phone on the way there, and have a comic book stuffed in my pocket, just in case I get bored. Fat chance. [continue reading…]

From LRC, 2003

Things not to say to a first-time mom

I was interviewed today for the Who Owns You? documentary, by Taylor Roesch. We spent almost an hour on the interview part in my study (luckily I had put my standard poodles Sir Boudreaux and Anna Banana Belle to the groomers to avoid barkage), then a couple hours, with his two assistants Ben and Jorge, partaking of beer, bourbon, and cigars and on my back porch. Then I sent them off to Fogo de Chao. “Begone!,” I said, “you roving documentarians!”

Update: my friends mock my standard poodles. Some pix of my babies are below. And here are some blogposts about them: Poodles Bite; Anna Belle (da poodle) ‘n Me.