From: eugene.leitl@lrz.uni-muenchen.de
Date: Fri Oct 01 1999 - 15:17:49 MDT
From: Will Ware <wware@world.std.com>
And then Will Ware <wware@world.std.com> says:
I was thinking a little about a free-market replacement for the
government enforcement of intellectual property law. Apologies for the
length. I'd be curious to hear if people think this is a viable or
worthwhile idea.
CAN FREE MARKET MECHANISMS REPLACE PATENT LAW?
Once upon a time, there was no intellectual property law. An inventor
seeking to prevent others from using his invention had one option:
keep the invention secret. The U.S. government invented patent law to
meet two conditions: first, that inventions should be disclosed to the
public, and second, that inventors should enjoy a temporary monopoly
on their inventions, providing an incentive for disclosure.
Patent protection is not without its weaknesses. Lately, the U.S.
Patent Office has been issuing frivolous patents for ideas that have
been in common use for many decades. Patent examiners are becoming
less and less competent to evaluate the novelty of claimed inventions.
Because the examiners are incompetent, would-be inventors can
re-patent past inventions, unreasonably extending their monopoly.
Furthermore, patents are now being questionably applied to software
and genetic sequences. Both of these are purely informational in
nature, and might more properly be protected by copyright law. The
sweeping nature of patent protection, combined with the practice of
perpetually re-patenting old inventions, means that large areas in
which innovation can occur are closed off to inventors without large
budgets for legal services.
The GNU General Public License (GPL) attempts to address some of these
frailties. It is a worthy effort, but suffers weaknesses of its own.
Because of the demanding complexities of current copyright law, and
the ambiguity of the term "derived works" as it applies to software,
the GPL is itself a complicated document.
The weaknesses of intellectual property law follow from the false
assumption that information (a group of bits) can be owned as if it
were a physical object (a group of atoms). Physical objects can be
transferred or transported, but they cannot be copied as information
can be copied.
Property law makes sense because the use of an object can be
controlled by only one person or legal entity. If several people wish
to jointly control some object, they must agree on some form of voting
or proxy, thus molding themselves into a single legal entity.
In order to design protocols that work well for information, one must
take into account its inherent nature. Information can be concealed
or disclosed. Disclosed information can be copied. Concealed
information can sometimes be inferred from clues. Concealment or
secrecy is the only meaningful sense in which an individual can be
said to own a piece of information.
TRADE SECRETS, PUBLIC DOMAIN
There are examples today of information protected by secrecy. The
legal term for this is a trade secret. A famous example is the recipe
for Coca Cola, which is not patented or copyrighted, since either
would require disclosure. The Coca Cola Company prefers simply to keep
the recipe a secret. It has remained a secret for many decades, so
they must have developed successful protocols for maintaining its
secrecy.
Public domain represents yet another weakness of intellectual property
law. An otherwise protectable piece of information can be placed in
the public domain, meaning that it is publicly disclosed for anybody's
use. But anyone may then copyright or patent that information,
removing it from the public domain, and charging license fees for use
by others.
If this weakness of public domain status did not exist, there would
have been no need to invent the GPL. Works of free software could
simply be placed in the public domain, and they would remain there in
perpetuity, available for anyone's use. The impermanence of public
domain status is partly responsible for the complexity of the GPL.
A HYPOTHETICAL SCENARIO
Suppose that one day, all government protection for intellectual
property were to disappear. Trade secrets would still exist. License
fees previously collected under patent and copyright law would end,
and information disclosed under patents and copyrights would become
public domain. It would no longer be possible to remove something from
the public domain. Invention-based monopolies would be enforceable
only by maintaining trade secrets.
In the absence of government protection, it would seem that inventors
would keep inventions secret forever, hoping to maintain perpetual
monopolies. Obviously, innovation would grind virtually to a halt.
The government's solution has been to implement a body of law, patent
law, which uses government force to enforce monopolies provided the
inventor willingly discloses his invention.
The inventor's interest is served by concealing his invention because
there is a differential advantage in maintaining a monopoly, compared
to competing against many other vendors, all familiar with the
invention. This differential advantage, summed over the entire future,
is a finite amount of money, and the inventor will usually be willing
to disclose the invention in exchange for that amount of money. Since
money in the present is more valuable than money in the future, the
inventor will likely disclose the invention for a smaller amount.
DISCLOSURE TRADING
Suppose an inventor wants to borrow against the future value of his
monopoly. He prints shares, or contracts, saying that either he will
disclose his invention on a particular date, or he will pay a
predetermined penalty to the share's bearer. He sells these shares to
anybody willing to buy them.
To his customers, the shares represent a promise that he will disclose
the invention, reducing its cost. Disclosure benefits the customers,
so they will start buying the shares. They are willing to pay some
money now, so they can save some money in the future.
The cost of shares fluctuates as the market's estimate of the secret's
value goes up and down. Many purchasers will buy shares just to try
to make money on price fluctuations. The price will tend to track the
market's estimate of the future value of the monopoly.
If the inventor ever succeeds in buying back all the shares, then he
is relieved of the need to disclose the invention, since he would only
be paying penalties to himself. If he sells only a few shares, he may
decide that paying a few penalties is worthwhile in order to maintain
the monopoly.
I've assumed here that government intervention isn't necessary to
enforce contracts. There is some good evidence to support this
assumption. Most business contracts these days (the sort under
discussion here) are privately arbitrated and privately enforced.
WHAT DOES THIS MEAN TODAY?
In reality, there is an essentially-zero probability that government
protection of intellectual property will cease. In a world with
patent and copyright protection, can disclosure shares do anything
useful?
Some ideas that originated as oddities of libertarian thought have
gradually trickled into the mainstream. Among these are privatized
mail delivery, education vouchers, and private arbitration and
enforcement of contracts. One might hope that if enough functions of
government are obsoleted by free-market replacements, the government
might eventually dry up and blow away. Not likely, but we can always
hope.
One place to experiment with disclosure shares is the world of
proprietary software. Software companies are tinkering with the idea
of open-sourcing their efforts (or at least some of their efforts),
with varying degrees of success. Netscape's Mozilla project is
probably the most famous example, the one everybody hoped would
succeed, and which has run into grave difficulties.
If Netscape had chosen instead to sell disclosure shares, things might
have gone easier for them. Share sales would represent income, at a
time when they were having trouble finding income. By tracking the
price of shares, they could have measured the market demand for an
open-source browser. This might have provided better information for
committing resources to the Mozilla project.
- - - - - - - - - - - - - - - - - - - - - - - -
Resistance is futile. Capacitance is efficacious.
Will Ware email: wware @ world.std.com
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