Patents – Page 7 – artdiamondblog.com

William Rosen’s “The Most Powerful Idea in the World”

Source of book image: http://ffbsccn.files.wordpress.com/2010/07/the-most-powerful-idea-in-the-world.jpg

The range of William Rosen’s fascinating and useful book is very broad indeed. He is interested in THE question: why did the singular improvement in living standards known as the industrial revolution happen where and when it did?
The question is not just of historical interest—if we can figure out what caused the improvement then and there, we have a better shot at continuing to improve in the here and now.
I especially enjoyed and learned from William Rosen’s discussion, examples and quotations on the difficult issue of whether patents are on balance a good or bad institution.
Deirdre McCloskey taught me that the most important part of a sentence is the last word, and the most important part of a paragraph is the last sentence, and the most important part of a chapter is the last paragraph.
Here are the last couple of sentences of Rosen’s book:

(p. 324) Incised in the stone over the Herbert C. Hoover Building’s north entrance is the legend that, with Lincoln’s characteristic brevity, sums up the single most important idea in the world:

THE PATENT SYSTEM ADDED

THE FUEL OF INTEREST

TO THE FIRE OF GENIUS

In the next few weeks I will occasionally quote a few of the more illuminating passages from Rosen’s well-written account.

Book discussed:
Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.

Myhrvold Innovates in Financing Innovation

“Nathan Myhrvold, chief of Intellectual Ventures, says patent holders are being treated unfairly.” Source of caption and photo: online version of the NYT article quoted and cited below.

When Nathan Myhrvold was at Microsoft, he helped Bill Gates write The Road Ahead, a well-written book full of realistically optimistic speculation, forecast and analysis.
Besides his main initiative, discussed below, he has recently been in the news due to his bold and controversial suggestion for how to cheaply solve global warming.

(p. B1) BELLEVUE, Wash. — Nathan Myhrvold wants to shake up the marketplace for ideas. His mission and the activities of the company he heads, Intellectual Ventures, a secretive $5 billion investment firm that has scooped up 30,000 patents, inspire admiration and angst.

Admirers of Mr. Myhrvold, the scientist who led Microsoft’s technology development in the 1990s, see an innovator seeking to elevate the economic role and financial rewards for inventors whose patented ideas are often used without compensation by big technology companies. His detractors see a cynical operator deploying his bulging patent trove as a powerful bargaining chip, along with the implied threat of costly litigation, to prod high-tech companies to pay him lucrative fees. They call his company “Intellectual Vultures.”
White hat or black hat, Intellectual Ventures is growing rapidly and becoming a major force in the marketplace for intellectual capital. Its rise comes as Congress is considering legislation, championed by large technology companies, that would make it more difficult for patent holders to win large damage awards in court — changes that Mr. Myhrvold has opposed in Congressional testimony and that his company has lobbied against.
. . .
(p. B10) The issues surrounding Intellectual Ventures, viewed broadly, are the ground rules and incentives for innovation. “How this plays out will be crucial to the American economy,” said Josh Lerner, an economist and patent expert at the Harvard Business School.
Mr. Myhrvold certainly thinks so. He says he is trying to build a robust, efficient market for “invention capital,” much as private equity and venture capital developed in recent decades. “They started from nothing, were deeply misunderstood and were trashed by people threatened by new business models,” he said in his offices here.
Mr. Myhrvold presents his case at length in a 7,000-word article published on Thursday in the Harvard Business Review. “If we and firms like us succeed,” he writes, “the invention capital system will turbocharge technological progress, create many more new businesses, and change the world for the better.”
In the article and in conversation, Mr. Myhrvold describes the patent world as a vastly underdeveloped market, starved for private capital and too dependent on federal financing for universities and government agencies, which is mainly aimed at scientific discovery anyway. Eventually, he foresees patents being valued as a separate asset class, like real estate or securities.
His antagonists, he says, are the “cozy oligarchy” of big technology companies like I.B.M., Hewlett-Packard and others that typically reach cross-licensing agreements with each other, and then refuse to deal with or acknowledge the work of inventors or smaller companies.
. . .
Mr. Myhrvold personifies the term polymath. He is a prolific patent producer himself, with more than 100 held or applied for. He earned his Ph.D. in physics from Princeton and did postdoctorate research on quantum field theory under Stephen Hawking, before founding a start-up that Microsoft acquired.
He is an accomplished French chef, who has also won a national barbecue contest in Tennessee. He is an avid wildlife photographer, and he has dabbled in paleontology, working on research projects digging for dinosaur remains in the Rockies.

For the full story, see:
STEVE LOHR. “Turning Patents Into ‘Invention Capital’.” The New York Times (Thur., February 18, 2010): B1 & B10.
(Note: ellipses added.)
(Note: the online version of the article is dated February 17, 2010.)

The Bill Gates book is:
Gates, Bill. The Road Ahead. New York: Viking Penguin, 1995.

Myhrvold’s Harvard Business Review essay is:
Myhrvold, Nathan. “The Big Idea: Funding Eureka!” Harvard Business Review 88, no. 2 (March 2010): 40-50.

“Nathan Myhrvold with a machine that freeze-dries food. Intellectual Ventures so far has paid $315 million to individual inventors.” Source of caption and photo: online version of the NYT article quoted and cited above.

The Case for Patent System Reform

(p. A13) The Patent Office now gets some 500 million applications a year, leading to litigation costs of over $10 billion a year to define who has what rights. As Judge Richard Posner has written, patents for ideas create the risk of “enormous monopoly power (imagine if the first person to think up the auction had been able to patent it).” Studies indicate that aside from the chemical and pharmaceutical industries, the cost of litigation now exceeds the profits companies generate from licensing patents.

For the full commentary, see:

L. GORDON CROVITZ. “OPINION: INFORMATION AGE; Why Technologists Want Fewer Patents.” The Wall Street Journal (Mon., JUNE 15, 2009): A13.

Our “Patently Absurd” Patent System

(p. A15) The Founders might have used quill pens, but they would roll their eyes at how, in this supposedly technology-minded era, we’re undermining their intention to encourage innovation. The U.S. is stumbling in the transition from their Industrial Age to our Information Age, despite the charge in the Constitution that Congress “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.”
. . .

Both sides may be right. New empirical research by Boston University law professors James Bessen and Michael Meurer, reported in their book, “Patent Failure,” found that the value of pharmaceutical patents outweighed the costs of pharmaceutical-patent litigation. But for all other industries combined, they estimate that since the mid-1990s, the cost of U.S. patent litigation to alleged infringers ($12 billion in legal and business costs in 1999) is greater than the global profits that companies earn from patents (less than $4 billion in 1999). Since the 1980s, patent litigation has tripled and the probability that a particular patent is litigated within four years has more than doubled. Small inventors feel the brunt of the uncertainty costs, since bigger companies only pay for rights they think the system will protect.
These are shocking findings, but they point to the solution. New drugs require great specificity to earn a patent, whereas patents are often granted to broad, thus vague, innovations in software, communications and other technologies. Ironically, the aggregate value of these technology patents is then wiped out through litigation costs.
Our patent system for most innovations has become patently absurd. It’s a disincentive at a time when we expect software and other technology companies to be the growth engine of the economy. Imagine how much more productive our information-driven economy would be if the patent system lived up to the intention of the Founders, by encouraging progress instead of suppressing it.

For the full commentary, see:
L. GORDON CROVITZ. “OPINION: INFORMATION AGE; Patent Gridlock Suppresses Innovation.” Wall Street Journal (Mon., JULY 14, 2008): A15.
(Note: ellipsis added.)

Myhrvold Claims His Patent Purchases Benefit Small-Time Inventors

Source of graph: online version of the WSJ article quoted and cited below.

(p. A1) Millionaire Nathan Myhrvold, renowned in the computer industry as a Renaissance man, has a less lofty message for tech companies these days: Pay up.

Over the past few years, the former Microsoft Corp. executive has quietly amassed a trove of 20,000-plus patents and patent applications related to everything from lasers to computer chips. He now ranks among the world’s largest patent-holders — and is using that clout to press tech giants to sign some of the costliest patent-licensing deals ever negotiated.
. . .
(p. A21) Mr. Myhrvold says the fact he doesn’t make actual products is irrelevant. He stresses that Intellectual Ventures helps small-time inventors by providing them with an aggressive buyer to sell their patents to.
Intellectual Ventures, which has about $5 billion under management, bears some similarities to a private-equity firm that operates investment funds for the benefit of investors. However, its largest fund has an unusual structure in which fund investors are also responsible for the lion’s share of the fund’s returns.
It works like this: Technology companies agree to pay patent-licensing fees to inoculate themselves against potential lawsuits by Intellectual Ventures. These fees are how the fund generates its returns. As part of the deal, though, these same companies also put up the cash Mr. Myhrvold uses to buy more patents, receiving an equity stake in the fund in return.

For the full story, see:

AMOL SHARMA and DON CLARK. “Tech Guru Riles the Industry By Seeking Huge Patent Fees.” The Wall Street Journal (Weds., SEPTEMBER 17, 2008): A1 & A21.
(Note: ellipsis added.)

“Nathan Myhrvold’s message for tech firms: Pay up.” Source of caption and photo: online version of the WSJ article quoted and cited above.

Inability to Patent Sulfa, Delayed Its Marketing

When new uses of old, unpatentable drugs are discovered, there seems to be inadequate incentive to publicize them, and bring them to market. (For example, I think I have seen research suggesting that aspirin and fish oil capsules, are as effective in fighting heart disease as some newer drugs, but are nonoptimally utilized because of perverse incentives.) Maybe a revision of the patent law should be considered that permits some patenting of new uses of old drugs and substances?

(p. 172) It was wonderful that this powerful, inexpensive medicine was now available, but for a year after the Pasteur Institute announcement, no one marketed it seriously in its pure form as a medicine. Because it was not patentable, it was difficult for major chemical or drug firms to see a way to make much of a profit from it. It was not until months after the Pasteur group’s first publication on sulfa that the president of Rhône-Poulenc, an industrial supporter of Fourneau’s laboratory, visited the Pasteur Institute to hear about it. After talking with the researchers he decided to launch Septazine, a variation on pure sulfa that he felt was different enough to allow patenting—and hence profits. Septazine reached the marketplace in May 1936.

Source:
Hager, Thomas. The Demon under the Microscope: From Battlefield Hospitals to Nazi Labs, One Doctor’s Heroic Search for the World’s First Miracle Drug. New York: Three Rivers Press, 2007.

French Entrepreneur Fourneau Was Against Law, But Used It

The existence and details of patent laws can matter for creating incentives for invention and innovation. The patent laws in Germany and France in the 1930s reduced the incentives for inventing new drugs.

(p. 141) German chemical patents were often small masterpieces of mumbo jumbo. It was a market necessity. Patents in Germany were issued to protect processes used to make a new chemical, not, as in America, the new chemical itself; German law protected the means, not the end. . . .
. . .
(p. 166) Fourneau decided that if the French were going to compete, the nation’s scientists would either have to discover their own new drugs and get them into production before the Germans could or find ways to make French versions of German compounds before the Germans had earned back their research and production costs—in other words, get French versions of new German drugs into the market before the Germans could lower their prices. French patent laws, like those in Germany, did not protect the final product. “I was always against the French law and I thought it was shocking that one could not patent one’s invention,” Fourneau said, “but the law was what it was, and there was no reasons not to use it.”

Good Laws Protect the Innovator

James Burke writes well, and what he writes is often stimulating, and thought-provoking. On the other hand, some of what he writes is exasperating—he writes in sweeping generalities, and often his ‘connections’ are exaggerations, giving no weight (or even mention) to alternative, equally plausible accounts.
But on balance, I enjoy listening to him. Here is one of the bits I especially liked:

(p. 19) Because the rule of law exists, and above all because it encourages and protects acts of innovation with patent legislation, we in the modern world expect that tomorrow will be better than today. Our view of the universe is essentially optimistic because of the marriage between law and innovation. Law gives an individual the confidence to explore, to risk, to venture into the unknown, in the knowledge that he, as an innovator, will be protected by society.

Source:
Burke, James. The Day the Universe Changed: How Galileo’s Telescope Changed the Truth and Other Events in History That Dramatically Altered Our Understanding of the World. Back Bay Books, 1995.

Controversial Patent Reform

Source of graph: online version of the WSJ article quoted and cited below.

(p. A3) The sweeping patent initiative — backed by a business coalition dominated by technology companies such as Cisco Systems Inc. and Microsoft Corp. — would . . . shift the balance of power of the U.S. patent system. It would make it a bit harder for holders to protect patents. Advocates of the legislation contend the current system encourages patent litigation and costly judgments against infringers — and stifles innovation. They say the proposals are designed to bring patent rules in line with the rapidly changing U.S. economy, where inventions often reflect hundreds of potentially patentable ideas.

Mark Chandler, Cisco’s general counsel, dismissed concerns that non-U.S. companies might gain some advantage by the bill. He said the proposed changes would strengthen companies at “the heart of innovation in the American economy,” better positioning them to compete at home and abroad.

Opponents of the legislation argue that it would make it easier for foreign competitors to legally copy patented methods and products.

For the full story, see:
GREG HITT. “Patent System’s Revamp Hits Wall; Globalization Fears Stall Momentum in Congress; AFL-CIO Sends a Letter.” The Wall Street Journal (Mon., August 27, 2007): A3.
(Note: ellipsis added.)

Alaska Air Used Skunk Works to Develop Check-In Innovation

Source of graphic: online version of the WSJ article cited below.

The innovation described in the article excerpted below is credited as arising from a ‘skunk works’ project. There’s a neat book called Skunk Works that describes how Lockheed set up an autonomous unit to develop the first stealth air force technology. (Their plant was in a smelly part of town, so it was dubbed the ‘Skunk Works.’)

Clayton Christensen has recommended that established incumbent companies set up skunk works operations in order to develop disruptive technologies that would not survive if they were developed within the main corporate culture and infrastructure.

(In the article excerpted below, it is puzzling to read that Alaska Air went to the trouble to take out a patent, even though they apparently have no intention of enforcing it.)

(p. B1) ANCHORAGE, Alaska — When the Ted Stevens Anchorage International Airport was planning a new concourse, prime tenant Alaska Airlines insisted on a counterintuitive design: "The one thing we don’t want is a ticket counter," said Ed White, the airline’s vice president of corporate real estate.

So the 447,000-square-foot Concourse C, which opened in 2004, has only one small, traditional ticket counter, even though the carrier’s 1.2 million Anchorage passengers checked in through that area last year. This unconventional approach — which uses self-service check-in machines and manned "bag drop" stations in a spacious hall that looks nothing like a typical airport — has doubled Alaska’s capacity here, halved its staffing needs and cut costs, while speeding travelers through the building in far less time.

. . .

(p. B4) Alaska’s design in Anchorage has turned heads in the industry, and in 2006 the airline was awarded a U.S. patent for the check-in process, something it calls the two-step flow-through. Mr. White says his company isn’t trying to keep competitors from going down the same path, but pursued the patent more to reward the many employees who helped to bring the idea to fruition.

Other airlines quickly sent scouts up to Anchorage to check out the new concourse, including a team from Delta Air Lines Inc., Mr. White says. A few months ago, Delta completed a $26 million renovation of its check-in hall at Hartsfield-Jackson Atlanta International Airport, and the finished product looks remarkably similar to that of Alaska Airlines. Greg Kennedy, Delta’s vice president for customer service there, says the new layout has enabled the airline to process passengers checking in during the peak spring break travel period in 20 to 30 minutes at most, compared with two or three hours three years ago — and all in the same amount of square footage but 50% more usable space. Mr. Kennedy says he isn’t aware of a visit to Anchorage but doesn’t dispute it.

. . .

Alaska, the nation’s ninth-largest carrier by traffic, started a "skunk works" lab a decade ago to figure out how to use technology to make air travel less of a hassle for passengers. Out of that effort came the airline’s ground-breaking ability to sell tickets on the Internet and allow fliers to check in online, developments other carriers quickly followed.

For the full story, see:

SUSAN CAREY. "Case of the Vanishing Airport Lines; Alaska Air Speeds Up Flow Of Passengers by Jettisoning Traditional Ticket Counters." The Wall Street Journal (Thurs., August 9, 2007): B1 & B4.

Source of graphic: online version of the WSJ article cited above.