Patents - Friend or foe of capitalism?

[Zippyjuan]

An inventor does not usually have the resources to get his product to market utilizing large scales of production which means that it would be quite easy for a large company to steal his idea, make it more cheaply than he can, and put him out of business. That takes away his incentive (aside from personal reasons) to invent since he will not be able to realize the financial benefits of what he comes up with. Patents give him protection and thus encourage more innnovation. If I can steal ideas from you I have no reason to invest in coming up with my own.

 

[heavenlyboy34]

An inventor does not usually have the resources to get his product to market utilizing large scales of production which means that it would be quite easy for a large company to steal his idea, make it more cheaply than he can, and put him out of business. That takes away his incentive (aside from personal reasons) to invent since he will not be able to realize the financial benefits of what he comes up with. Patents give him protection and thus encourage more innnovation. If I can steal ideas from you I have no reason to invest in coming up with my own.

How does one "steal" an idea? Ideas are super-abundant (and not even real property). Even IP law uses the word "infringement" instead of "theft". Whether they are "good" or not is purely subjective. If some company comes along and is able to copy inventor x's idea, that just means inventor x has to continue producing ideas. So what? The inventor still has the idea and is free to find a company/venture capitalist to market and produce the product better and faster.

Even assuming company x copies the inventor's idea, the company is taking a risk and stands to incur huge losses. Inventions introduced by corporations that flop come about routinely.

Also, since company x lacks the innovative skills of the inventor, the company will eventually stop profiting on the idea and incur losses due to lack of satisfying market demand.

 

[hazek]

An inventor does not usually have the resources to get his product to market utilizing large scales of production which means that it would be quite easy for a large company to steal his idea, make it more cheaply than he can, and put him out of business. That takes away his incentive (aside from personal reasons) to invent since he will not be able to realize the financial benefits of what he comes up with. Patents give him protection and thus encourage more innnovation. If I can steal ideas from you I have no reason to invest in coming up with my own.

Bullshit.

Evidence: http://www.youtube.com/watch?v=zL2FOrx41N0


p.s.: I hate to repeat myself but I guess I have no choice, YOU SHALL NOT SPREAD PROPAGANDA ON MY WATCH!

 

[Jovan Galtic]

We should all pay royalties to the family of the person who invented the wheel...

And if you think, what anyone "invents" is always based on things people before him invented:

[video=vimeo;14912890]http://vimeo.com/14912890[/video]

 

[Travlyr]

An inventor does not usually have the resources to get his product to market utilizing large scales of production which means that it would be quite easy for a large company to steal his idea, make it more cheaply than he can, and put him out of business. That takes away his incentive (aside from personal reasons) to invent since he will not be able to realize the financial benefits of what he comes up with. Patents give him protection and thus encourage more innnovation. If I can steal ideas from you I have no reason to invest in coming up with my own.

I agree. If I invest into either an invention (R&D) and someone else can copy my invention without making the R&D investment, a clever established manufacturer will put me out of business before I get the marketing plan assembled. Or, if I invest into making a movie and anyone can buy a DVD of my movie and show it in theaters for profit without paying me a royalty, then why should I even bother?

 

[Travlyr]

Your claims are typical of the brain-dead, economically absurd nonsense that is routinely trotted out to rationalize patent monopolies.

Actually, that was a question rather than a claim. The founders saw fit to include patents in the constitution. They were not brain-dead.

 

[Roy L]

An inventor does not usually have the resources to get his product to market utilizing large scales of production

He is also not usually an investor, entrepreneur or businessman. So what? We all have to find ways of making a living by dealing with others who can supply the ingredients we lack.

which means that it would be quite easy for a large company to steal his idea, make it more cheaply than he can, and put him out of business.

Nope. Ideas are not scarce and therefore can't be stolen. The inventor usually has special knowledge of his invention that competitors don't have, knowledge that gives him an advantage in engineering, design and development. He can leverage that knowledge to obtain the market reward for his contribution by working for a firm that CAN produce his invention efficiently, and wants the benefit of his special expertise.

That takes away his incentive (aside from personal reasons) to invent since he will not be able to realize the financial benefits of what he comes up with.

Flat false, as proved above. Clothing manufacturers pay clothing designers big money despite the fact that there is no patent or copyright monopoly on what they create. Vitamin makers pay engineers to design new products despite the fact that vitamins can't be patented.

Patents give him protection and thus encourage more innnovation.

Already refuted. Patents discourage innovation by giving the owner a rent collection privilege. He then no longer needs to innovate to make money.

If I can steal ideas from you I have no reason to invest in coming up with my own.

Already refuted. If all technology is freely available, the only way you can differentiate your products from those of competitors, thus making any profit at all, is by innovating to offer something new.

 

[Roy L]

The founders saw fit to include patents in the constitution. They were not brain-dead.

They also saw fit to include slavery.

Boink.

 

[Travlyr]

We should all pay royalties to the family of the person who invented the wheel...

No. Only for a limited time so that the inventor can recoup the cost of R&D at a minimum.

U.S. Constitution Article I. Section 8: To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;

 

[The Free Hornet]

I forgot to mention: without patents, every product becomes a commodity [false] that anyone can produce [false], so competition drives out all profits [false] EXCEPT those of the innovators who have invested in R&D and are thus offering something new that others haven't started producing yet!

Competition does not "drive out" profits. Margins are likely reduced by competition but they don't go to zero (or does "drives out all profits" mean something else?). Remember that people invest due to an anticipated or projected rate of return. If the profits are zero, there is no return and you would be better holding cash or making safer investments with a lower anticipated return.

Profits are more likely to be negative - very negative - than zero. Nobody aims for zero so the likilihood of hitting it is slim. Negative profits situation occur often because the demand or cost of a product was miscalculated. Things can be sold for a 5% loss because the alternative is a 50% loss. But I see little reason for profits to trend to zero excepting a stable market with little entry cost. Is your understanding different?

Zero-profit conditions can occur but they also require zero or near-zero entry costs. If the widget factory costs $1 million, the output will either have a predicted profit or it will not be made (these predictions would account for the loss of patents).

Not all things become commodities due to a loss of patents. E.g., anybody can cook a steak but that does not make it a commodity. Beef of a given grade may be a commodity, but the finished product is not. Restaurants trade not just on their legal right to cook without fear of patents, but on the ability they have demonstrated to the market. If you need heart medication, are you going to swallow the lowest cost pill or will you pay a premium for a proven product?

I agree with your conclusion, nonetheless:

So no patents means an INCREASED economic incentive to innovate, not a reduced one. The truth is the exact, diametric opposite of your claims.

Ending patents will

a) increase competition
b) increase innovation and reward implementing those innovations with marketable products
c) make many lawyers cry
d) cause big players to worry about the little players (instead of just bribing Congress)

Not having a crystal ball, I can't say what profits will do. Apple makes huge profits not so much by unique things they can do but by brand loyalty, being a fashion statement, and the trust they have earned among their customers (not me). I suspect patents hurt their competition more than it helps Apple, but I could be wrong. Their profits could remain largely unaffected.

 

[Roy L]

If I invest into either an invention (R&D) and someone else can copy my invention without making the R&D investment, a clever established manufacturer will put me out of business before I get the marketing plan assembled.

If that's the case (it typically isn't) then you are such an incompetent entrepreneur that you shouldn't be in business. Why can't you ever remember that the highly profitable and entirely patent- and copyright-free fashion industry proves your claims false?

Or, if I invest into making a movie and anyone can buy a DVD of my movie

Who is going to burn the DVD, and why?

and show it in theaters for profit without paying me a royalty, then why should I even bother?

How would they make a profit if anyone can get their own DVD and watch your movie whenever and wherever they like? Are you perhaps unaware that publishers keep classic works in print for profit without any copyright monopoly? If you don't want others to be able to show your movie, just encode it in a way they can't play back with normal equipment, and distribute it with dongle keys that only work with one copy.

 

[heavenlyboy34]

Actually, that was a question rather than a claim. The founders saw fit to include patents in the constitution. They were not brain-dead.

No, but they were mercantilists and definitely not free market capitalists. (The patent clause of the constitution was inspired by British Mercanilism, btw. Thank the Federalists for that)

 

[heavenlyboy34]

Actually, that was a question rather than a claim. The founders saw fit to include patents in the constitution. They were not brain-dead.

They were not only brain-dead, but Mercantilist and anti-market in this and several other regards (like mail delivery).

 

[Roy L]

No. Only for a limited time so that the inventor can recoup the cost of R&D at a minimum.

Garbage. There is no such guarantee or limit either given or implied.

U.S. Constitution Article I. Section 8: To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;

Article IV, Section 2: "No Person held to Service or Labour in one State, under the Laws thereof, escaping into another, shall, in Consequence of any Law or Regulation therein, be discharged from such Service or Labour, but shall be delivered up on Claim of the Party to whom such Service or Labour may be due."

 

[heavenlyboy34]

FWIW, if you submit a manuscript or whatever to a publisher with the (c) on it, you're more than likely to get rejected. According to the Copyright Act, something is automatically copyrighted when it is "created"(in the legal sense). Patent law says virtually the same thing.

 

[Travlyr]

Yeah, it doesn't look like patent law works. People will steal the idea anyway and bankrupt the inventor through litigation.

Eli Whitney - American Inventor
Eli Whitney (8 Dec 1765 - 8 Jan 1825) [Direct Relation - 23rd Cousin, 1x removed] was a famous inventor, best known for his invention of the Cotton Gin (Patent X72, 1794). It was one of the key inventions during the Industrial Revolution and helped to shape the economy of the pre-Civil War South. The Cotton Gin made cotton into a profitable crop, but also created long-lasting social and economic impacts through the use of slaves for farming the cotton. Whitney lost most of his profits from the Cotton Gin in court trying to defend his patent, ended up closing his factory, and nearly filed for bankruptcy.

 

[heavenlyboy34]

Yeah, it doesn't look like patent law works. People will steal the idea anyway and bankrupt the inventor through litigation.

Indeed. Just wait till they find a way to patent your DNA. Then every expression of your DNA will be subject to the whims of the patent owner. Enjoy slavery.

 

[Roy L]

Competition does not "drive out" profits.

Yes, it does.

Margins are likely reduced by competition but they don't go to zero (or does "drives out all profits" mean something else?). Remember that people invest due to an anticipated or projected rate of return. If the profits are zero, there is no return and you would be better holding cash or making safer investments with a lower anticipated return.

No profit does not mean no margin or no return. In economics, profit is considered a return over and above rent, wages and interest. Many people work in order to obtain wages, and invest in order to obtain interest.

But I see little reason for profits to trend to zero excepting a stable market with little entry cost. Is your understanding different?

I understand that some producers will make gains, others will suffer losses, but it will be because of the quality of their management, their decisions, the effects of unpredicted external events, etc., not through having "stolen" an idea and undercut its creator.

Not all things become commodities due to a loss of patents.

True. My bad. I meant the products that would have been commodities had they not been restricted by patents, not products like original artworks, brand-name products like cars, etc.

E.g., anybody can cook a steak but that does not make it a commodity. Beef of a given grade may be a commodity, but the finished product is not. Restaurants trade not just on their legal right to cook without fear of patents, but on the ability they have demonstrated to the market. If you need heart medication, are you going to swallow the lowest cost pill or will you pay a premium for a proven product?

I agree there would still be product and brand differentiation in many cases.

Ending patents will

a) increase competition
b) increase innovation and reward implementing those innovations with marketable products
c) make many lawyers cry
d) cause big players to worry about the little players (instead of just bribing Congress)

+1

 

[thequietkid10]

That's what the market does. The one who first produces a good or services maintains a great advantage in profits, name promotion (brand name), etc... They will have great gains in the short term, but when you introduce a patent into the equation they will not be incentived to continually improve on their product by others who will to produce the good or service as well (who wish to produce it in a more effective, efficient, cheaper, and a better quality product). So if you grant someone a monopoly on this you shield them from the market, in effect, reducing the continual advancements to be made in the product for the firm/person that created the product "first" does not have the need to improve on the product for they don't have to (for they have no legally allowable competition). Patents stifle the process of the market.

The problem with your statement is that you assume that brand name is the driving force behind sales. I grew up on store brand products, Aldi's and Save a Lot. It's cheaper and is just as effective.

The problem with using fashion as an example of patent free society is that it is art. And the definition of "art" is so ubiquitous now that I can create art in 2 minutes. I haven't taking an art class since Middle School, but I could learn how to knit in an afternoon and have a garment made up by bedtime. Would it sell, I highly doubt it. But I could wear it and someone else could wear it as well.

Ideas may be free, but new science isn't, whether your in a Communist, Mixed, or anarcho capitalism economy. A company who invest 20 million to develop a new drug will never recoup their losses if someone can create a generic for 5 million.

 

[Jovan Galtic]

And why is development of new drugs so expensive?