Convergences

Are confusing and conflicting patents the same as NO patents?

Nanotechnology

I recently read “Patenting Nanotechnology” by law prof Mark Lemley. Excitement about (and fear of) nanotechnology seems to be waning rather than waxing. The article nonetheless includes a curiously paradoxical line of argument about intellectual property that I think is worth setting out in detail.

Presently there is some concern that there are already too many overlapping nanotechnology patents, and/or too many nanotechnology patents that cover basic research concepts as opposed to actual useful products. A number of observers have warned that these patents could interfere with ongoing nanotechnology research. This is a familiar theme over the past couple decades of patent scholarship.

Of course, patents (with all their warts) were around during the nineteenth and twentieth centuries, too, when a lot of important advances were made in technology. All kinds of things from sewing machines to radios were developed, and it all worked out okay in spite of much patent nonsense being involved.

Now, here is where Mark comes up with a twist on the familiar arguments. To help make his paper about nanotechnology more interesting, he seems to want to build up the case that nanotechnology is different from earlier technologies, so that the patent system might cause problems for nano that they did not cause for earlier technologies. So he goes through each earlier technology in some detail, and argues that in each case, in effect, for each of these key earlier technologies, patent protection was in effect non-existent. In the case of sewing machines, for example, the patents were tied up in litigation; in the case of radio, WWI intervened and the patents were taken over by the government.

Therefore, he argues, nanotechnology will be the first important technology that is in effect actually protected by patents. He goes on to conclude that there is no reason to worry about this yet. This conclusion seems sensible enough. So… what?

With his argument that previous key technologies were in effect devoid of patent protection as a practical measure, even though they were patented, well, he’s created a mythical monster, the worm who eats his own tail. I don’t think he fully realizes this, so I will play with the idea a little bit.

The argument is, in effect, that when a technology is tied up in patents to such an extent that no one has a clearly enforceable right to it… well, in effect, this is just the same as the technology’s having no patent protection at all. It’s a free-for-all. 

If this is right, well, no need to worry about the anti-commons then, is there, not for nanotechnology nor for anything else. If the muddle with patents gets bad enough, well, everyone just ignores them, or stakes his own claim, or the whole business gets swept aside with compulsory licensing. On the other hand, if all these key technologies developed in a free-for-all, why bother with a patent system at all?

To which I say, hold on a minute! First, just because patents end up getting into a legal muddle after a technology is developed, does not mean that the incentive system that patents creates was not important to their initial creation. Investors are looking to the future, and if things don’t turn out as well as they expect, they’ll have to make the best of it. But that doesn’t mean that our ground rules can treat future expectations as irrelevant to investment.

Second, even if patents get tied up in litigation, well, is this the same thing as having no patent protection at all? In the case of sewing machines, yes, there was a lot of litigation. But there were a limited number of parties to that litigation, and ultimately it was all sorted out (Adam Mossoff’s paper on this offers details).

What I end up taking away from Mark’s paper is this:

--The problem of too many patents (or patents on the wrong sort of idea) is unlikely to emerge as a practical barrier to scientific or technological development for a wide variety of reasons.

--The problem of too many patents (or patents on the wrong sort of idea) is nonetheless worth thinking about, because systemic problems might affect whether investors are likely to see returns on their investment. Mind you, the effect is likely to be small, compared to other factors like entrepreneurial skill in producing and marketing a new idea.

--Too many patents might create a situation similar to the situation one would see with no patents at all, but the details matter. But accepting this idea without looking closely at the context could do quite a lot of mischief.

Mark, being tolerant, will forgive my wrenching his argument out of its context.

-SS

Ronald Coase's Anniversary lectures at George Mason

Yesterday I attended "Coase's Federal Communications Commission at 50," at George Mason Law School, a discussion featuring FCC Commissioner Robert McDowell, Tom Hazlett, Jeff Eisenach, Evan Kwerel and John Williams. On the whole, a cheering event, for it was a strong reminder that truth will out, and advances can be made in government in spite of its being perpetually beseiged by opportunists.

Fifty years ago economist Ronald Coase wrote an article in which he challenged the conventional wisdsom that the electromagnetic spectrum used by wireless devices such as broadcasting had to be centrally planned by government. He argued that instead there could be property rights in spectrum, and it could be sold in the market. This would be a much less costly way of making sure services reached consumers. At the time this idea was considered absurd. But gradually as the FCC became overwhelmed by the problems with central planning for spectrum, they became willing to experiment with spectrum markets. John Williams, formerly an engineer within the FCC, quietly toiled away within the agency on the engineering end of this problem since 1965 (the year I was born); economist Evan Kwerel likewise for the economic end (not for quite so long). The experiments were successful--overwhelmingly so--and progress continues to be made today. Slowly.

But what does the future hold? Commissioner Rob McDowell pointed out that recent auctions show some backsliding on the part of the Commission. In the recent sale of spectrum for 700 Megaherz wireless services, the FCC insisted on describing services that the winners would have to provide, instead of granting flexibility. Commissioner McDowell suggested that the future is likely to prove this move was a mistake.  Economist Tom Hazlett pointed to the Commissions' slowness in recognizing that the spectrum now being used by televsion broadcasters is mostly wasted; to move more valuable services out to consumers more quickly, broadcasters should be free to sell their rights to other types of providers. Evan Kwerel cheerful identified those holding up more rapid progress--opportunists, who wish the government to hand out spectrum so long as it goes to their favorites; "taxation through regulation" forces within the public sector, who wish to hang on to it for government uses; "technology romantics" who see technology as being able to solve economic problems without property rights; and anti-capitalists, who fear private companies' power in the market--to such an extent that they are willing to forgo trillions of dollars in economic growth that would benefit consumers. Jeff Eisenach is concerned about current political trends, which look to government as the solution to all ills; if the "public option" is best for health care, why not for communications? (Indeed, one might ask, why not for food, clothing, shelter, transport?) .

What grounds for optimism are there? First, that Coase's ideas were tried and did, slowly, take hold, in spite of the mockery to which he was subjected when they were first pronounced. Second, the government-run systems are likely to collapse of their own weight. Third, and most importantly, the power of consumer demand. Businesses feel it; the FCC feels it; legislators feel it--it has become overwhelming, and it is driving change. Slowly. 

Having observed the policy process for twelve years now, I am beginning to feel that the power and importance of consumer demand *to policy* (as opposed to business matters like sales) has been greatly underestimated and overlooked. It is undeniably shaping spectrum policy. It is certainly shaping copyright policy. It is shaping privacy policy, another area I have observed for some years. It strikes me that it would be worth making a more systematic study of consumer demand and policy. Both the right and the left seem to leave it out as a force to be reckoned with. Daniel Spulber's recent work on consumer coordination is a good start.

Sketch shows Jeff Eisenach top left, Commissioner McDowell top right, and Evan Kwerel, lower down.

Spectrum White Spaces

The FCC voted to open up the white spaces. All five Commissioners agreed, though Tate would prefer to limit the number of channels covered, and each issued his/her own statement. All emphasized the careful and tentative nature of the action; were they into Deng Xiaopeng quotations, they would have said "Mozhe shitou guo he" ("Crossing the river by feeling for stones").

The underlying Second Report and Order (08-260) will be published within a few days.

Chairman Martin commented:

Today’s action was advocated by a diverse coalition of consumer groups, technology leaders and Internet pioneers. Opening the white spaces will allow for the creation of a WiFi on steroids. It has the potential to improve wireless broadband connectivity and inspire an ever-widening array of new Internet based products and services for consumers. Consumers across the country will have access to devices and services that they may have only dreamed about before. I fully expect that everything from enhanced home broadband networks, to intelligent peer-to-peer devices, and even small communications networks will come into being in TV “white spaces.”