3 ms·

Your second suggestion would be extremely exploitable, because you'd be allowing the licensee unilateral control over the price. Your competitor just came out w

Your second suggestion would be extremely exploitable, because you'd be allowing the licensee unilateral control over the price. Your competitor just came out with a cool new widget that's going to keep them in the black for years? Copy it, shove it on the market at near-zero price, and enjoy your uncontested market.

hakfoo 6y ago
Aren't there already anti-dumping regulations for similar goals? I'd wonder if you'd see a lot of products sold "ready to assemble". The software is free, or some mandatory-license component costs pennies, but it's useless without the remaining bits to plug it into.
mjevans 6y ago
Could you provide a hypothetical example of where this might exist? I'm having trouble envisioning how selling some form of hardware at an extreme markup is necessary if the compulsory license fee for being able to copy it is a PORTION of the sale (and not profit) price? That would ideally mean that someone else has decided to bring the product to market for more people, and that the actual inventors get rewarded for enriching society faster and more greatly in total.
- GeneralMayhem 6y ago
  Along the lines of hakfoo's response below, this would naturally happen any time you're dealing with enhancements to a larger ecosystem (i.e. complementary goods) - the sale price of certain products can be profitably set to almost zero if they encourage buying more expensive, or at least higher-margin, things. A specific example: patentable improvements to consumer-grade inkjet printers might be disincentivized under this scheme, because the real money is in selling ink to locked-in buyers. I think there are some more fundamental problems with using sale price as the base of computation. What's "final" sale? Is it the price my company sells for wholesale? If I own my own vertically-integrated distribution network and sell direct to consumers, do I now owe the patent holder more per item? Am I incentivized to put my retail stores behind a shell company to bake the "final" sale price earlier in the pipeline? On that note, what's to stop me from doing so recursively? I could set up a "manufacturer" entity that produces the patented widget at a loss, paying the minimum licensing fee, and then an "assembler" entity that packages it into a meaningful product and actually makes all the profit. I suppose to some extent this is the same problem as deciding when to impose sales tax, so maybe the same regulation works there, but it feels trickier. That's also setting aside what I expect are deal-breaking practical problems having to do with components. Most actual products are not patented in their entirety. If you use a patented design that improves one component of a $400 machine, is the license fee based on a fraction of $400? Do I owe the patent holder more per unit if I assemble my product with a high-quality aluminum shell instead of a cheap plastic one? If I have to use 5 different patent ideas to make that machine, do I pay all 5 owners the same fraction? If not, then who decides the respective fee for each one? (As an example, a modern smartphone probably makes use of hundreds of patents - think about how many patented bits of circuitry there are just in the radio and modem.)
  - mjevans 6y ago
    Addressing the middle point (which you've labeled a fundamental problem)... I am not a patent lawyer (or even a lawyer generally). However I believe the stopping point is exhaustion. A license for X would be demanded when the first sale that uses X happens. If the IP is related to the formulation or formation of part of a capacitor then the payment for such is part of the price of that good and is not required or taken again at any other stage (other than in the price of the components already included in the BoM). Similarly, the price is reflected in the first transfer of the good, not in any final consumer sale of the unit.
    - GeneralMayhem 6y ago
      >the price is reflected in the first transfer of the good, not in any final consumer sale of the unit. Right, so this is trivially exploitable, as I described. Set up two entities. One of them makes the capacitor and "sells" them at cost, or lower, to the second one. The license fee will now be based on that deflated price. Arguably it's fraud, but proving that - and the extent to which it's out of the ordinary, since manufacturers do sell each other things at discounted bulk rates all the time - would be a nightmare. Even if you close that loophole (e.g. with perfect fraud enforcement (ha)), you're incentivizing inefficiencies by punishing vertical integration. What if it's cheaper (less labor, less waste, less machinery, easier logistics, ...) to produce a whole circuit as one unit rather than building the capacitors first and then assembling? If the license price depends on the first transfer point, then the circuit manufacturer is better off wasting money and resources to isolate the patent-dependent components so that they can be transferred independently, with the licence fee coming out of that small price. Otherwise, they'd have to pay a fraction of the entire final product, which is presumably much greater.
  - mjevans 6y ago
    Re: 5 different IPs. That's already covered for the COMPULSORY LICENSE, which would have the terms that society agrees are the absolute maximum that could be charged. Lets say this is 25% of the sale price. That is, society says that at most 25% of the sale, not profit, price is allowed to cover IP costs. In your fictional example of 5 different involved patents the legal framework incentivizes the 5 patent holders and those who desire their patents to negotiate a split. Re the other question: no patent fees in sub-assemblies aren't counted, those things were already on the market as whole units. However a large corporation that is integrated across manufacturing many things (which presumably also has other market distortions like a huge IP portfolio anyway) would be able to count it, if they were also making those sub components. Yes that seems unfair to me, but it's a reflection of a different broken system and should be addressed there.

hakfoo 6y ago

Aren't there already anti-dumping regulations for similar goals? I'd wonder if you'd see a lot of products sold "ready to assemble". The software is free, or some mandatory-license component costs pennies, but it's useless without the remaining bits to plug it into.

mjevans 6y ago

Could you provide a hypothetical example of where this might exist? I'm having trouble envisioning how selling some form of hardware at an extreme markup is necessary if the compulsory license fee for being able to copy it is a PORTION of the sale (and not profit) price? That would ideally mean that someone else has decided to bring the product to market for more people, and that the actual inventors get rewarded for enriching society faster and more greatly in total.

GeneralMayhem 6y ago
Along the lines of hakfoo's response below, this would naturally happen any time you're dealing with enhancements to a larger ecosystem (i.e. complementary goods) - the sale price of certain products can be profitably set to almost zero if they encourage buying more expensive, or at least higher-margin, things. A specific example: patentable improvements to consumer-grade inkjet printers might be disincentivized under this scheme, because the real money is in selling ink to locked-in buyers. I think there are some more fundamental problems with using sale price as the base of computation. What's "final" sale? Is it the price my company sells for wholesale? If I own my own vertically-integrated distribution network and sell direct to consumers, do I now owe the patent holder more per item? Am I incentivized to put my retail stores behind a shell company to bake the "final" sale price earlier in the pipeline? On that note, what's to stop me from doing so recursively? I could set up a "manufacturer" entity that produces the patented widget at a loss, paying the minimum licensing fee, and then an "assembler" entity that packages it into a meaningful product and actually makes all the profit. I suppose to some extent this is the same problem as deciding when to impose sales tax, so maybe the same regulation works there, but it feels trickier. That's also setting aside what I expect are deal-breaking practical problems having to do with components. Most actual products are not patented in their entirety. If you use a patented design that improves one component of a $400 machine, is the license fee based on a fraction of $400? Do I owe the patent holder more per unit if I assemble my product with a high-quality aluminum shell instead of a cheap plastic one? If I have to use 5 different patent ideas to make that machine, do I pay all 5 owners the same fraction? If not, then who decides the respective fee for each one? (As an example, a modern smartphone probably makes use of hundreds of patents - think about how many patented bits of circuitry there are just in the radio and modem.)
- mjevans 6y ago
  Addressing the middle point (which you've labeled a fundamental problem)... I am not a patent lawyer (or even a lawyer generally). However I believe the stopping point is exhaustion. A license for X would be demanded when the first sale that uses X happens. If the IP is related to the formulation or formation of part of a capacitor then the payment for such is part of the price of that good and is not required or taken again at any other stage (other than in the price of the components already included in the BoM). Similarly, the price is reflected in the first transfer of the good, not in any final consumer sale of the unit.
  - GeneralMayhem 6y ago
    >the price is reflected in the first transfer of the good, not in any final consumer sale of the unit. Right, so this is trivially exploitable, as I described. Set up two entities. One of them makes the capacitor and "sells" them at cost, or lower, to the second one. The license fee will now be based on that deflated price. Arguably it's fraud, but proving that - and the extent to which it's out of the ordinary, since manufacturers do sell each other things at discounted bulk rates all the time - would be a nightmare. Even if you close that loophole (e.g. with perfect fraud enforcement (ha)), you're incentivizing inefficiencies by punishing vertical integration. What if it's cheaper (less labor, less waste, less machinery, easier logistics, ...) to produce a whole circuit as one unit rather than building the capacitors first and then assembling? If the license price depends on the first transfer point, then the circuit manufacturer is better off wasting money and resources to isolate the patent-dependent components so that they can be transferred independently, with the licence fee coming out of that small price. Otherwise, they'd have to pay a fraction of the entire final product, which is presumably much greater.
- mjevans 6y ago
  Re: 5 different IPs. That's already covered for the COMPULSORY LICENSE, which would have the terms that society agrees are the absolute maximum that could be charged. Lets say this is 25% of the sale price. That is, society says that at most 25% of the sale, not profit, price is allowed to cover IP costs. In your fictional example of 5 different involved patents the legal framework incentivizes the 5 patent holders and those who desire their patents to negotiate a split. Re the other question: no patent fees in sub-assemblies aren't counted, those things were already on the market as whole units. However a large corporation that is integrated across manufacturing many things (which presumably also has other market distortions like a huge IP portfolio anyway) would be able to count it, if they were also making those sub components. Yes that seems unfair to me, but it's a reflection of a different broken system and should be addressed there.