Sunday, June 15, 2014

Welcome to Software Patents - 2

Pieter Hintjens

One difficulty with tracking patent costs is that settlements are mostly secret. For instance, today Microsoft makes more money from extorting license fees from Android vendors than it does from its own failed mobile operating systems. Most of these deals are secret. Only a few firms, like Barnes & Noble, come out and fight [..]

I hope you're asking how this is possible, how a legal system can be so destructive and yet invulnerable. The answer is both simple, and profound. Put simply, the patent industry is so profitable that it corrupts anyone it does not destroy [.. And t]he irony is that without exception, a business that embraces the patent system will die. Motorola, Ericsson, and Nokia were once powerful firms that drove entire economies. Their slow death was predictable and I'll explain later how it happened, and why Microsoft and Apple will follow. It's such a predictable process that it deserves its own Law [..].

It's not just software. For decades, the [bad boys] of the patent system have been the pharmaceutical industry. The truth is that new drugs, like new software, are never the product of single teams working in shiny white laboratories. All innovation comes from mass effort, over time, to solve numerous individual problems. it's not just the formula for a drug. It's ten thousand answers to a thousand problems, along the whole process. At some stage these come together into viable products [..].

In 1980 the US passed the Bayh-Dole act [which] allowed universities to keep the patents on federally-funded research. This is an extraordinary model. The public pays for research that is then owned by private business and sold back to the public at an extortionate profit. Bayh-Dole was written and pushed by a consortium of universities and big pharma. Lucky universities privatized every significant part of the drug research pipeline, and sold these rights off to their big pharma partners. The public saw new drugs for HIV/AIDS, but at a thousand dollars a pop. Hey, that's what health insurance is for, right?

But what was really happening was worse than a simple hijacking of public research and blackmailing of the sick and vulnerable. The drug pipeline stretches 15-20 years. It's a slow process of turning data into knowledge. The process depends on collaboration between teams, across the world. Patents poison this process. You cannot at the same time collaborate on research, and file patents. Simply publishing or discussing a new idea means you can't patent it [..] Successful patenting demands secrecy, whereas successful innovation demands open discussion. Ah, you see the conundrum [..].

The drug research pipeline is layered. That is, a product floats on a sea of techniques and intermediate tools, and primary research, each a necessary step on the way to the market. As Bayh-Dole bit, and universities across the USA and then Europe and Asia started to cash in, they patented more and more of these layers, until even basic research techniques were patented as "products". Meaning that researchers could no longer share techniques and basic knowledge [..].

The consequences were predictable. By the late 90's, the drug pipeline was almost empty. Pfizer and Merck and the other big pharma brands saw their profits falling off a cliff [..] Today Pfizer's share price has fallen by 62% from its high in April 1999. The Bayh-Dole act has not cured cancer. It has not helped the drug industry past that 20-year pipeline window. The universities that jumped on that ship have lost their best researchers. It hasn't produced a single new success in medicine. Instead, it has allowed a few to profit from what was already in the pipeline, and poisoned the well of US medical research for at least three decades. If we're lucky, the research has gone elsewhere: to India, South Africa, China, Brazil. If we're unlucky, it has just gone.

Any firm that lives by patents will eventually die by patents [..].

[T]he move towards a digital economy means that ideas and inventions are no longer as tangible as they were. We once powered our economies with steam, but today it is with algorithms. There is no essential difference, it is one of scale. As ideas become more abstract, they become more layered. In the construction of steam engines there may be ten layers of ideas. In a web site, tens of thousands. Where a steam engine patent affected 100 firms, a software patent may affect a million businesses.

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