Saturday, April 04, 2009

IP for loans?

With the big three auto manufacturers repeatedly asking the government for loans to stay alive, I think now is an excellent time to use our leverage to make those loans with the condition that they sell the IP rights on selected parts of their patent portfolio into the public domain in exchange for some amount of debt forgiveness. Whereas it’s going to be impossible to clean up the patent law in any near term, it would be interesting if some of those defensive patents became available for use without licensing. I wonder how much is in there that inhibited competition?

On the other hand, as an alternative to releasing them into the public domain, it might behoove American citizens to have the government retain these patent rights on our behalf. In today’s world of cross-licensing deals, and having one patent-infringement case always spawn a host of counter patent-infringment cases (in a MAD sense), perhaps it’s better to have a defense for the public.

Right now, if you, as an individual, infringe on a patent without the requisite licensing, you may get a cease-and-desist order (if they find out), and may have to pay a rather hefty fine (with treble damages if you knew you were infringing). Companies can get hosed, because if their product is based in part on the infringed patent, then, depending on the licensing that is available, it may no longer be a viable product once that happens. In the case where they’re simply copying the idea, that might be a good thing, but in the case where it was parallel discovery1, then they’re just out of luck.

If, like the companies with big patent portfolios, the government managed this portfolio on behalf of its citizens, they could do some interesting things. Try out this thought experiment based on the following licensing strategy:
  • Every citizen gets license to use anything it the government managed portfolio for non-commercial use. This equates nicely to the same effect of having the patent be in the public domain.

  • Any commercial entity can acquire a low cost license to use the patent, iff they agree to cross-license anything in their portfolio to the entire American public for non-commercial use as above for as long as they use the license.

  • Any commercial entity can retain licensing privileges for their IP, but there will be a much higher licensing cost to use a patent in the government portfolio.
Furthermore, the government can renew the patent as long as anyone else could.

Using this mechanism, we improve on the benefit to the public over these patents going into the public domain by (1) giving incentive to the companies to open their portfolio to the public, and (2) providing extra government income, which could be earmarked for the maintenance of the offices managing the government portfolio, as well as the patent office itself.

Personally, I think the IP system needs a fairly large overhaul to fix the issues of (1) the increasing (and varied) pace of discovery and obsolescence, (2) the volume of ideas and the general lack of cross-referencing2. Nonetheless, in lieu of a big rewrite (which is unlikely to occur wholesale), this incremental fix might be worthwhile. And GM could start us off.
1Parallel discovery is actually very likely to occur. Since there are treble damages for knowing you’re infringing, it behooves one to not know. Ultimately, companies stick their head in the sand and hope not to infringe, while their legal teams, separated from the rest of R&D by a Chinese wall sit ready to do patent searches if a lawsuit comes in the front door.
2I expect that the patent publications are like dry versions of the Whole Earth Catalog rather than a hierarchically organized, indexed, and cross-referenced document that leaves little doubt whether you’re product infringes and/or your claim is a new claim.

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