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Amazon One-Click Patent Struck Down
The US patent office has ruled that enough prior art anticipated the one-click patent to rule a number of the major claims invalid. Perhaps we should chalk up another win to Eric Maskin!
I'm pleased that the Amazon patent was ruled invalid but insufficient attention to prior art is not the main problem with current patent law. Patent law needs to change so that patents would be ruled invalid or given much shorter lengths if they do not involve large, sunk costs.
Posted by Alex Tabarrok on October 17, 2007 at 01:16 PM in Economics, Law | Permalink
Comments
The "one-click" patent has not yet been struck down. Pursuant to the Re-examination request, the PTO has merely issued a first Office Action in which it has rejected some of the claims. The assignee, Amazon, now has the ability to respond to the Office Action presnting arguments in favor of patentability and/or amendments to the rejected claims. The fat lady has not yet sung.
Posted by: KDeRosa at Oct 17, 2007 2:08:23 PM
I can understand the prior art objection. However, sunk costs? Just because other parties have profited from patent infringement, doesn't mean that a patent should be invalidated. Have I missed the meaning of sunk costs here?
Posted by: at Oct 17, 2007 2:17:02 PM
The idea is that patents should only be granted when the patentee has made significant sunk costs in R&D. More in the cited article.
Posted by: Alex Tabarrok at Oct 17, 2007 2:23:33 PM
I think this is it for the patent but I edited slightly to reflect the fact a number of the major claims have been rejected.
Posted by: Alex Tabarrok at Oct 17, 2007 2:25:28 PM
If the law used sunk costs as a factor, would a $300 million movie deserve longer patent protection than a $1 million indie flick, because the sunk costs are greater?
Posted by: 8 at Oct 17, 2007 2:29:03 PM
patents and copyrights, inventions and creative works.
Posted by: vm at Oct 17, 2007 2:35:44 PM
Patents are supposed to not be obvious to people in the industry. Just how one-click is supposed to fulfill this criterion is beyond me. And I STILL haven't activated it because I consider it to be a fundamentally flawed idea anyhow, so maybe that's why Amazon actually were the first to do it?
Posted by: Cynical Masters Student at Oct 17, 2007 2:40:19 PM
Interesting paper Alex. You properly note that some patents are merely ideas written on paper. Others are accidental discoveries. Neither involved any great amount of sunk costs, but receive just as much protection as someone who spends millions of dollars.
I do have one problem with it: the use of the words of invention and innovation. They are not the same. Inventing something does not mean one is being innovative. There are thousands upon thousands of patents gathering dust at the USPTO. Inventions? Sure. Innovative? Apparently not. To be successful, one must be able to not only get their invention to the market, they have to get the market to accept their invention. This is where innovation steps in.
It's not just good enough to get a patent because you have sunk your life savings into it. You should also be able demonstrate a working product and the ability to successfully market it. Otherwise we end up with situations where patent trolls, like NTP, receive a nice chunk of change from companies that are innovative, like RIM.
Posted by: Vincent Clement at Oct 17, 2007 3:15:08 PM
Copyrights too?
Posted by: shr at Oct 17, 2007 3:20:21 PM
No patents without implementation!
Doesn't have to be sales-ready, but it has to work.
That wouldn't solve the problem with this one, but it would solve much of the larger one.
Posted by: jb at Oct 17, 2007 3:23:32 PM
Sunk costs should be irrelevant in assessing patents. Intangibles are valued by their future incremental cash flows. A patents useful life, which is substantial to its value, should not be diluted by how much cash was thrown at it.
Posted by: Dan at Oct 17, 2007 4:40:44 PM
I agree wholeheartedly with Alex. So nice to at least know my instincts are shared by him. The sunk costs are the only rationale that makes the justification of monopoly rents. If the sunk costs are low, then the patent should terminate sooner since they do not need as long to recoup their investments.
Posted by: jason voorhees at Oct 17, 2007 4:42:23 PM
It's a very bad idea to tie patent protection to the amount spent on R&D. Patent protection is a form of reward (patent holders stand to gain financially from the patent), therefore making it conditional on prior spending will act as feedback loop rewarding spending, especially spending that can be easily be linked to the invention. But why should one reward spending? Isn't spending a loss? Isn't the true value of an invention apparent in the money you can earn from it, a measure of social benefit?
The current system, which establishes only innovation and usefullness, is better: Creating the most world-changing inventions while spending as little as possible is the dominant strategy. With the R&D cost-based system the dominant strategy would be massive spending just to increase the likelihood of obtaining a patent - an option open only to large organizations. The brilliant inventor laboring in a tiny lab would be at a disadvantage, and entry barriers for inventions would rise, clearly a bad outcome.
Patents should be there to allow an inventor to capture more of the social gains incident to his achievement (the useful invention), thus closing a positive feedback loop encouraging success, rather than effort. Paying for effort will produce more effort, but less success.
Rafal
Posted by: Rafal Smigrodzki at Oct 17, 2007 4:46:29 PM
Does anybody else agree that Rafal is a bit of a communist?
Posted by: Mr. Anderson at Oct 17, 2007 4:49:30 PM
I completely agree with Rafal. Usefulness of the patent, rather than the sunk costs involved should determine the reward for innovation/invention.
Posted by: anon at Oct 17, 2007 5:24:28 PM
I love branding people a communist as much as the next libertarian, but Rafal has a point. Alex's proposal has the merit of trying to bring rewards to new inventions closer to its costs, but it sounds as smart as paying your plumber to fix your sink by the hour.
Posted by: Phoebe at Oct 17, 2007 5:27:59 PM
I agree that the patent incentive should be different for different technology areas. In some areas, like software, innovation is not driven by the patent rewards; these areas should have weak or no patents. Other areas, like pharmaceuticals, are driven by patent rewards; these areas should have stronger patent rewards.
But, conditioning the patent reward on the R&D done in a specific case just seems to be rewarding waste like Rafal says.
Posted by: joeo at Oct 17, 2007 5:34:01 PM
I agree that the patent incentive should be different for different technology areas. In some areas, like software, innovation is not driven by the patent rewards; these areas should have weak or no patents. Other areas, like pharmaceuticals, are driven by patent rewards; these areas should have stronger patent rewards.
But, conditioning the patent reward on the R&D done in a specific case just seems to be rewarding waste like Rafal says.
Posted by: joeo at Oct 17, 2007 5:34:31 PM
The real trick is how you assign which R&D spending to which patent. Does 3M get to claim all of its failed glue research as sunk costs for post-it notes, or only the 10 seconds in which a researcher realized there was a use for a glue that can be easily pulled apart?
Posted by: DK at Oct 17, 2007 5:46:25 PM
PUBLIC R&D, PRIVATE PRODUCTION AND DISTIBUTION OF DRUGS
Per Dean Baker, the economic losses from patent abuse by Big Pharma is
huge, including price discrimination, copycat drugs, selling disease
instead of cure, over extended patents and generic suppression and buyouts,
physician influence and wasteful advertising and marketing.
Baker recommends giving the patent rights to the National Health Institute
and licensing the results for private production and distribution by
anyone. With appropriate competition, it should result in more diverse
and effective drugs at dramatically lower prices near production cost.
Why should NIH produce better results than Big Pharma absent incentives
associated with patent protection?
First, the current performance of Big Pharma is easy to top under most
any condition. Second, well paid scientists benefit and are motivated by
prestige and other factors not associated with patents. Third, this
already happened with a breast cancer drug developed by NIH and
appropriated by Big Pharma. Fourth, drugs like vaccines shunned by Big
Pharma would be forthcoming from NIH. Fifth, the absurd levels of
expense on marketing and advertising would decline dramatically along
with using physicians as forced distributors.
Rewarding sunk costs to Big Pharma is what got us into this mess.
Posted by: barry payne - economist at Oct 17, 2007 7:15:42 PM
If the law used sunk costs as a factor, would a $300 million movie deserve longer patent protection than a $1 million indie flick, because the sunk costs are greater?
Copyrights last too long also. Seventy years plus life is ridiculous. The first copyrights in England lasted only fourteen years and I've been told the first American copyrights lasted only seven. I believe copyrights should last a few decades at most (perhaps 25-30 years).
Posted by: tommy at Oct 17, 2007 7:42:35 PM
To amend my last comments, I would make an exception for company names and the like. Copyrights on company names could last several decades.
Posted by: tommy at Oct 17, 2007 7:45:04 PM
company names are covered by trademarks.
Posted by: joeo at Oct 17, 2007 8:02:23 PM
In response to Rafal, as long as sunk costs are proportioned correctly with the length of patent, there seems to be no real reason to *waste* resources.
Furthermore, the implications of tying sunk costs to patent length, as I see it, are to decrease the total number of patents filed. It encourages those mini-lab inventors to get their ideas funded and fully developed before taking them to the patent office.
Posted by: msun641 at Oct 17, 2007 9:00:13 PM
Does anybody else agree that Mr. Anderson likes to make ad hominem attacks?
On a more serious note, I think Rafal's analysis falls down on the fact that he counts the patent as a monetary reward. In fact, for most companies and for most patents, the cost of patenting exceeds the monetary benefit. A patent will produce and expected average return that exceeds the cost of filing the patent (ball park $15,000) when there is 1) a very valuable innovation, 2) which has no easy way to work around, and 3) applies to a very valuable market, and 4) the possibility of enforcing infringement is high. Thus the value of the patent is already tied to its social value (3 of the 4 factors). Essentially, a few blockbuster patents generally pay for a large number of relatively worthless patents.
The second important aspect is that patenting costs are a small fraction of innovation costs. It doesn't make sense to spend millions more on R&D to try and get a better patent, when spending 10's of thousands spent on patent attorneys could do the same trick. Furthermore, surveys of R&D managers has shown that obtaining a patent is not a main driver for R&D spending.
The end result is that R&D-cost based patenting would primarily change company patenting behavior without changing their R&D behavior. Companies with high R&D costs per patent (like pharmaceutical companies) would patent more while those with very low R&D costs (so-called "patent trolls" comprised entirely of patent attorneys) would patent less.
Posted by: nelziq at Oct 17, 2007 10:48:12 PM
Having been innovating a while, I've been watching patents rather closely. I see four problems with the way the patent system is used.
1) The patent office is negligent about prior art - many, many patents with clear prior art are issued (example here). Somebody victimized by a patent suit that has prior art should probably try suing them for their lawsuit-related fees.
2) Big companies file the most patents, because only they have the money to pay patent lawyers in bulk.
3) Because of the long timeline of patents relative to many industries' innovation cycles, most startup company patents end up not with innovators, but with patent trolls - companies specializing in buying out patents from dead companies. They live so long they do active harm to the public by slowing innovation.
4) The civil courts, where patent suits are tried, are deeply unjust. Discovery and deposition mechanisms in civil courts allow plaintiffs to regularly force defendants to spend alot of money amassing answers to questions. No burden of proof whatsoever is needed to use these. This is often used by big companies to make life tough for small innovative companies.
I appreciate any help on this issue, but I think your proposals are only half-right.
Notice that big companies are unlikely to have trouble amassing big innovation bills (that's their whole problem, right?), so I'm not seeing how that'd help. The little guys would just have no or lesser patents in their fights now.
Now, I do think it makes sense to shorten patents selectively. My preference is by industry - after all, patents run on the slowest innovation cycle, the drug industry's. Computer software runs on a 2-year innovation cycle, but we still have to live with patents from ten cycles back. Imagine if the drug industry had to face 200-year-long patents; that's where we are. Therefore, patents should last only 2 years for us. Instapundit agrees, though I can't quickly find the link.
Posted by: Jon Kay at Oct 17, 2007 10:51:13 PM
It's quite ironic that Rafal, who is arguing for patents to be valued based on their market price, is being called a communist by people arguing for patents to be valued based on the effort required to invent.
That somehow seems...backward...to me.
Posted by: jb at Oct 17, 2007 11:17:41 PM
What is the line that defines "large" sunk costs?
Posted by: Rose at Oct 18, 2007 12:21:27 AM
It's a very bad idea to tie patent protection to the amount spent on R&D. Patent protection is a form of reward (patent holders stand to gain financially from the patent), therefore making it conditional on prior spending will act as feedback loop rewarding spending, especially spending that can be easily be linked to the invention. But why should one reward spending? Isn't spending a loss? Isn't the true value of an invention apparent in the money you can earn from it, a measure of social benefit?
Patents are a monopoly and a barrier to innovation, not a reward for it. After all, innovators can earn competitive rents by exploiting their first mover advantage and in many cases selling complementary services. Patents don't guarantee a profit on patented inventions, and the PTO is filled with patents on inventions that never earned a dime.
Patents have also been used to undermine non-patent holders' civil liberties and the rule of law, as Jonathan Hornblower found out at the unclean hands of James Watt and Matthew Boulton.
Posted by: Bill Stepp at Oct 18, 2007 5:20:32 PM
Someone suggested that patents be awarded a certain length based on its value. Well who determnes value? And perhaps a patent is just a little bit ahead of its time and will generate great value right after its truncated period for lack of value. There was an earlier entry last week about how fast the idea around certain magnetic properties led to much much larger hard drives. That guy could have gotten a patent, but the value took time to reveal itself.
Posted by: techreseller at Oct 19, 2007 12:24:27 PM
The "line" in defining large sunk costs is the time it takes the corporation's average variable cost curve to approach their average total cost curve. In the short run, ATC > AVC because our sunk costs are fixed, but in the long run, our firm's variable cost = total cost because they are able to substitute sunk costs and variable costs more easily.
In my opinion, sunk costs should generally determine patent length, but at the same time we should provide incentives for companies to discover new products, methods, etc. that have a large benefit for humanity but a lack of incentive to devote money to in R&D. Case in point, the reward to put a robot on the moon (provided by a private company), or a hypothetical $3,000,000,000 bounty to discover a cure for AIDS that is patent free. In fact, forget the $3,000,000,000, determine the prize after the cure is found in order to determine the sunk costs involved in finding a cure and avoid any DWL in prize money. And yes, I think the government should foot the bill for the prize money. Instead of spending tens of billions in Iraq, how many problems in third world countries could our economy have solved?
Posted by: avatara at Oct 19, 2007 4:22:27 PM
The sunk cost idea is, as they say, patently ridiculous. First, it rewards inefficiency; no consumer should have to wait extra years for a cheaper product just because its inventor was incompetent. Second, it invites corruption. As an inventor, I would be happy to pay $100K to the flunky brother of somebody at the patent office in return for extra years of monopolization.
Posted by: nick at Oct 23, 2007 6:00:34 PM
Posted by: 鑽石 at Apr 2, 2008 10:46:52 PM
