CLIP "Compulsory Licensing of Intellectual Property"

Proposal for C.L.I.P (“Compulsory Licensing of Intellectual Property”) By Dan Abrams February 10, 2008 My claim: Invention is primarily what makes life better for humanity over time, not business (and increasingly not the legal system). Business is good primarily insofar as it encourages advancement for humanity. The current patent system may be good for business but not for advancement. What is the purpose of intellectual property protection? 1) To encourage advancement by providing inventors of IP with a profit incentive 2) To reward such advancement seems fair. What is the motivation of the current U.S. patent system that provides a temporary monopoly to the first inventor? 1) The inventor should have control over his/her invention 2) Making it incumbent upon the inventor to profit from his own invention motivates not just the advancement but also the commercialization/popularization. What are the negative ramifications of the current system of patent monopoly? 1) A competitor threatened by an invention has a motivation to purchase the patent rights for the purpose of killing its competition by simply preventing the any use of that invention. 2) Businesses predicated upon IP have an incentive to be secretive and non-collaborative (which is antithetical to scientific advancement). 3) Inventors must also be entrepreneurs or else be otherwise beholden to businessmen to commercialize their ideas. This reduces the incentive to invent and further motivates the smart people to become businessmen over inventors. 4) Patent infringement lawsuits are expensive and an unnecessary burden on the courts. The patent lawyers end up getting hourly fees on top of massive percentages of judgments and settlements. There is an incentive to use the patent monopoly as a pure business tactic to hinder the competition or to extort lucrative settlements. What is my solution? C.L.I.P (“Compulsory Licensing of Intellectual Property) The following is one possible implementation of the CLIP concept. Of course, specific terms and aspects would be subject to political and legal wrangling as well as corporate diplomacy. For a 5 year window inventors applying for patents could select a traditional patent or a CLIP patent. After that probationary term only CLIP patents would be possible. What is a CLIP Patent? A CLIP Patent offers the inventor 50 (fifty) years of profit incentive but not necessarily a monopoly. A CLIP Patent confers upon the inventor a monopoly only if no one takes advantage of the “compulsory licensing” system. How does the “compulsory licensing system” work? A company interested in using the compulsory licensing system of a particular CLIP Patent must abide by certain strict rules. 1) They must set aside the greater of 5% of the retail price or 10% of the profit of the good or service that they sell that will employ the CLIP Patent to go into the “inventors’ revenue pool” (IRP). They would have to agree to “open the books” to independent auditors with a “pot-odds disincentive system” that would penalize them at a premium above the likelihood of getting caught multiplied by the amount they attempted to improperly exclude from the IRP. This would encourage fair & honest accounting (not “Hollywood accounting”) for the inventors’ share. 2) The inventors’ pool for that good or service is put in an escrow account (in the safest/most conservative of financial instruments - like US Bonds) that is regulated by a new branch of the USPTO called the “Inventors’ Revenue Pool Service”. The interest on the IRP would be distributed as defined by the inventors’ relative shares in that IRP. If your invention were used for 50 years (like a projection tube TV) you would be handsomely rewarded but not nearly as much for Plasma TVs. 3) Every year, interest from a given IRP are distributed to all the inventors of record. This would be determined initially by the corporation (based on standardized guidelines) but subject to arbitration much like the Writers Guild of America’s screen-credit arbitration process. An independent organization would evaluate the merits of inventors’ contentions that they deserve a greater share than some other inventor. 4) The standardized guidelines would be established by an expert task force for each industry. There would be less incentive to “game” this system (compared to the current monopoly system) because they know they have to pay a set amount into the IRP so they shouldn’t care too much about how it’s split up. The current monopoly system has such vastly varying extremes of outcomes that litigation is unavoidably a huge part of the game. An example of standardized guidelines for a new computer printer might take existing distributions of inventor shares (all publicly available on the web) as precedent balanced against the arbitrator’s assessment of the value to that particular product. So if the printer previously used 24 CLIP Patent inventions but now used a new wireless technology then maybe the floor for the new invention would be 4% and the ceiling would be 20% of that IRP. If one invention replaced another then that would be reflected in the share of the IRP. What are the benefits of the CLIP Patent system? 1) Encourages innovation with a longer profit cycle without encouraging the “killing of progress”. 2) Better inventions are more likely to be effectively brought to market because competition doesn’t bind the inventor to a particular company (a variable which can only hurt the chances of the best product being best implemented commercially). Either the new product is better or worse that what already exists. If it is better and the particular company with the monopoly is anything short of excellent then the chance of the best product prevailing are diminished. On the flip side, if the new product is worse but is superbly marketed then the success of the better product that already existed is therefore diminished. 3) Businesses using the CLIP system have a known, quantifiable cost system for invention. 4) There is also a limit to any damages that could potentially arise from infringement. Their cost of litigation should drop substantially. 5) There would be less incentive to develop “me too” technology that only nominally differentiates itself from a previous invention. More development would go into genuine breakthroughs that would stand the test of time. Think of 50 years of CLIP revenue for an AIDS vaccine as opposed to developing another version of Lipitor. ADDITIONAL IDEAS: - Maybe to address the problems of a first-to-file “winner take all” system would be to set aside some portion of the IRP to “researchers in the field”. That way those who publish foundational research in a field (on which the invention is based) can still profit in some way. The RITF could include anyone who published on the internet. If they could prove that they played a role in an invention then they could apply for arbitration. Maybe with 100 “votes” from recognized members of that industry (in good standing) someone could get a hearing. Every vote that is subsequently validated in arbitration would add credibility to that member of that industry (for subsequent votes). Every vote that is subsequently ruled invalid in arbitration would commensurately tarnish the voter’s record. Maybe with 1000 votes an arbitration ruling could be appealed. - In arbitration there could be limits on presenting your case (as a nuisance lawyer disincentive) like only 2 days to make your case and 1 day to rebut your rival. And if you lose you have to pay a fee to the IRP or arbitration (but not court costs nor rival’s legal fees). OK, that’s my first draft of the CLIP concept. Poke holes in it. Let me know its flaws and game-able aspects. For now it’s only a thought experiment. But in time it could evolve into groundbreaking policy. I appreciate your consideration. Good karma to you. Regards, Dan Abrams