At TCSDaily, Michael Rosen explores IBM's recent moves on the patent front, as it increasingly embraces open source software, opens up its own patents to scrutiny, and commits resources to reviewing patents obtained by others.

His conclusion is sound -- that the company is motivated pretty much by self interest, but that its activities may well promote the public good to some degree.

But there is a dimension to the issue to which this analysis, and most others, seems oblivious. There is an underlying assumption that large companies should favor IP rights, so when they do not it is "man bites dog." In fact, the attitude of large companies to IP is complex and not necessarily favorable.

In the age of the Internet, large firms favor copyright because it is a vital part of having a product to sell. If anyone with a computer can take your product, you have no business.

Patents are different. Exploiting a patent requires capital, factories, customer lists, a brand name. IBM has all these things, as do other industrial giants, but an outside inventor has none of them. Patents are the mechanism by which the outsiders can bargain with the IBMs of the world and get a share of the returns from an innovation. The inventor supplies the patent; IBM the capital, the brand name, and the customers.

But now imagine a world without patents. The outside inventor has nothing to sell, and thus will not exist. Inventors will work for large firms or not at all, and will be paid as employees, not as contributors of intellectual capital. Granted, the large company cannot protect the inventions made in its labs, but it has many other sources of market power, and any loss from the lack of protection is compensated for by the ability to take the creative work of other companies that have less in the way of capital, or brand recognition, or long-standing customer relations.

One of the silliest of doctrines in a long line of antitrust folly is the argument that IP is "anti-competitive." IP is a mechanism that enables and enhances competition by creating a new form of market power, a form particularly important to start-ups, that counterweights the more conventional forms.

Granted the many difficulites of implementing a patent sytem -- and PFF was an early participant in KSR, urging the Supreme Court to tighten up the nonobviousness test -- it is a crucial factor in maintaining an open industrial structure. Here, as elsewhere, the anti-IP crowd represents the forces of entrenched privilege that want to pull up the ladder.

posted by James DeLong @ 9:27 AM | Patents

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