05 January 2009

Patent Value Taxation

As I've said previously, I dislike the patent system. Patents are a government granted monopoly, which is something I instinctively dislike. The principle of giving a temporary monopoly to inventors to encourage innovation and the publication of their inventions, thus allowing everybody to benefit from innovation in the process, has some merit in theory, but in practice, innovation seems to occur irrespective of whether or not the innovation is patentable. The current system acts more as a protectionist racket, allowing corporations to patent trivial developments in order to block competition. It also stiffles innovation in many circumstances, as it makes it difficult to create new inventions which rely on other patented inventions, particularly if there are a number of them held by different people. On that basis, I'd like to see the whole system abolished.

Realistically, I don't envisage that happening any time soon, given the lobbying power of beneficiaries of the system, so I would suggest another approach in the shorter term; if a similar system to self-assessed land value tax were used, it would enable inventors to retain an income stream, but it would capture for the public purse a proportion of the value created by the government granted monopoly, it would discourage frivolous patenting and it would bring inventions out of patent if they became commercially non-viable.

Here's how I would envisage the system working: At the point of filing the patent, the registrant would be required to specify how much they value the patent at. Throughout the (currently 20 year) period of the patent, the holder would be required to pay, say, 5% of that amount per annum, possibly with a small grace period at the start to allow the inventor to market his invention. The patent valuation would be publicly available and anybody prepared to meet that valuation could buy the patent from the holder. The holder could revalue the patent upward (but never downward) at any time, with the holder then paying 5% of the new valuation. If, at any point, the holder felt that the value of the patent had fallen such that it was not worth paying the 5%, they would be free to cancel the patent, with the invention falling into the public domain.

I would expect such a system to result in a major reduction in the number of patents filed and in many cases, a shortening of the length of patents, which would enable the public to benefit from freely available innovations more quickly and would free inventors to build on a larger base of usable knowledge.


Mark Wadsworth said...

This is one of AC1's ideas, but he'd apply it to all intellectual property.

Paul Lockett said...

I think the approach could work for copyright too, but there is an additional difficulty, in that it would require a return to registration of copyright. That would have benefits, such as freeing orphan works, but it could create problems in areas such as news reporting, where publication has to be quick. Copyright is also much more internationally harmonised than patent law, so that could make the approach more difficult to introduce.

In principle, I'd be in favour of using the same approach for copyright, but I'd need to give some more thought to the practicalities.

Ideally, I'd like to see the copyright and patent systems abolished, but in reality, there are probably too many snouts in the trough for that to happen.

AntiCitizenOne said...

What's the difficulty with regard to copyright?

The copyright is priced in the U.K. is only defended in the U.K.

Paul Lockett said...

The main issue I can see is that it would require a return to registration of copyright, rather than it being applied automatically. I'm not sure if that would cause unintended consequences, such as news media holding back stories in order to register their reports before publishing them. There is also the issue of moral rights and whether you would require registration for them to be enforceable.

I'm not saying that it wouldn't work, but I think there is more to consider than with patents.

AntiCitizenOne said...

Well yes, registration is implied by payment.

Vindico said...

I quite like this idea. Practical issues would need to be resolved, but in principle it would work. One should pay in proportion to the value of the property for legal protection, as with LVT.