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Against Monopoly

defending the right to innovate

Monopoly corrupts. Absolute monopoly corrupts absolutely.





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OPEC 2.0

There is an interesting op-ed in today's New York Times by Tim Wu warning of the dangers of allowing one or two large telecoms to control the bandwidth of the internet. He then goes on to argue that reforming the rules for allocating spectrum could enhance the competition the wire-based telecoms face by allowing competitive innovation in the provision of wi-fi service.

While the point about the need for regulatory reform in the way the spectrum is allocated is well-taken, what the piece fails to address is the whole debate over net neutrality and whether the large telecoms should be declared common carriers subject to the fair access rules that govern how truck lines and freight trains operate in the market.

Wu's analogy of the telecom monopoly/duopoly to OPEC is reasonable, but OPEC is an international cartel that is beyond the reach of any particular nation's antitrust laws. AT&T, Verizon and Comcast aren't, and I would hope that with the passing of the Bush administration, our government would get serious about the need to regulate these monopolies. Enhanced competition is obviously a good thing, but given that the telecoms have been successful in preventing cities (Philadelphia comes to mind) from putting up their own public wi-fi services, the playing field would hardly be level even if the FCC managed to come up with a good set of policies for allocating the spectrum. And, given the lobbying clout of the telecoms, my guess is that good publicly-oriented policies won't have much of a chance unless the Justice Department is standing behind the FCC waving the big antitrust stick.

Fantasy Sports Still Legal

Via the New York Times, the Supreme Court has refused an appeal by Major League Baseball of an appeals court ruling that the First Amendment rights of people engaged in fantasy baseball (and other sports) trumped any rights of publicity controlled by the league. MLB was attempting to force the various operators of fantasy sports web sites to pay royalties on their use of statistics generated by actual players to update performance of fantasy teams.

Old Is New Department: Microsoft Patents Proactive Virus Protection

Another ridiculous bit of neglect of the prior art by the USPTO via Information Week.

Innovation in the Air

There's a fascinating article in this week's New Yorker by Malcom Gladwell, called "In The Air," that makes a compelling case that scientific discoveries very frequently occur in multiples, i.e. instances where several scientists independently come to the same discovery. Examples include Newton's and Leibniz's independent discover of calculus, and the independent invention of the telephone by Alexander Graham Bell and Elisha Gray. An interesting corollary of this observation is that eponymous discoveries are also very frequently named for the wrong person. From Gladwell's article:

The statistician Stephen Stigler once wrote an elegant essay about the futility of the practice of eponymy in science that is, the practice of naming a scientific discovery after its inventor. That's another idea inappropriately borrowed from the cultural realm. As Stigler pointed out, "It can be found that Laplace employed Fourier Transforms in print before Fourier published on the topic, that Lagrange presented Laplace Transforms before Laplace began his scientific career, that Poisson published the Cauchy distribution in 1824, twenty-nine years before Cauchy touched on it in an incidental manner, and that Bienaymé stated and proved the Chebychev Inequality a decade before and in greater generality than Chebychev's first work on the topic." For that matter, the Pythagorean theorem was known before Pythagoras; Gaussian distributions were not discovered by Gauss. The examples were so legion that Stigler declared the existence of Stigler's Law: "No scientific discovery is named after its original discoverer." There are just too many people with an equal shot at those ideas floating out there in the ether. We think we're pinning medals on heroes. In fact, we're pinning tails on donkeys.

Stigler's Law was true, Stigler gleefully pointed out, even of Stigler's Law itself. The idea that credit does not align with discovery, he reveals at the very end of his essay, was in fact first put forth by Merton. "We may expect," Stigler concluded, "that in years to come, Robert K. Merton, and his colleagues and students, will provide us with answers to these and other questions regarding eponymy, completing what, but for the Law, would be called the Merton Theory of the reward system of science."

I certainly came away from the article believing even more strongly in the Boldrin-Levine contention that intellectual property rights just aren't necessary when you have the shoulders of giants to stand on.

Login Now Patented

Here's another apparent example of another USPTO boner. The Patent Office has granted the GraphOn Corporation a patent on two-factor authentication. According to the Business Wire post on this:

U.S. Patent 7,360,244 describes a method for authenticating a user access request over an initial communication medium to a device protected by a firewall system. The method involves communicating a password, or a portion of a password, which is required to complete the authentication back to the user on a communication medium other than the initial communication medium. This process is commonly referred to as two-factor authentication.

Now, according to the Wikipedia entry on two-factor authentication:

It should be remembered, however, that strong authentication and multi-factor authentication are fundamentally different processes. Soliciting multiple answers to challenge questions may be considered strong authentication but, unless the process also retrieves 'something you have' or 'something you are', it would not be considered multi-factor. The [Federal Fincial Institutions Examination Council] issued supplemental guidance on this subject in August 2006, in which they clarified, "By definition true multifactor authentication requires the use of solutions from two or more of the three categories of factors. Using multiple solutions from the same category ... would not constitute multifactor authentication."

Given that this kind of authentication is a business method, I would have thought that this kind of readily available evidence of prior art would have been enough to invalidate GraphOn's application for a patent.

Against Monopoly

In reading Robert Pear's excellent article in today's New York Times Business Section documenting the sheer waste associated with patent-oriented rent-seeking by Big Pharma in its lobbying over Congress's current round of attempted patent reform, I was struct by this sequence of quotes and comments on the disagreement between companies that rely on patents and those that don't regarding the proposed reforms of the inequitable conduct doctrine, which allows the courts to invalidate a patent if it is demonstrated that the patentee deliberately withheld or distorted information in the patent application process:

Mr. Armitage, the Lilly executive, said: "The doctrine of inequitable conduct is used so aggressively in litigation that it has unintended consequences. Applicants give the Patent and Trademark Office too much information, to avoid allegations that they concealed anything, and they refuse to explain the information, to avoid later allegations that they engaged in some form of misrepresentation."

James C. Greenwood, president of the Biotechnology Industry Organization, said, "The poor patent examiner gets a dump truck full of information that he has to pore over without any assistance from the applicant."

The number of patent applications 467,243 in 2007 has nearly doubled in the last 10 years and has more than tripled since 1987.

Jon W. Dudas, the under secretary of commerce for intellectual property, said: "We are getting more and more unpatentable ideas, worse and worse quality applications. Historically, in the last 40 years, the allowance rate the percentage of applications ultimately approved hovered around 62 percent to 72 percent. It went up to 72 percent in 2000, but dropped to 43 percent in the first quarter of this year."

On reading this, I started to wonder if anyone had thought about possible open source methods for reviewing patent applications, and, lo and behold, this is something the USPTO is apparently considering. Link here.

IBM Patents Congestion Pricing

Via thenewspaper.com, here is another example of why patents on software and business practices should never have been allowed.

IBM has been granted a patent on a system which would monitor vehical traffic on the "premium" lanes of a toll road (presumeably using EZPass-type technology) and automatically adjust prices for those lanes to ensure they don't become congested.

Quite an innovation.

I'm going to sit down and write a script which uses information on housing prices and zip codes to advise merchants on how much to charge customers in those zip code areas. Then I can get a patent on price discrimination, too.

Jobs Sues NYC

This is rich.

Via Crain's New York Business.com, Steve Jobs and Apple Computer are suing New York City (a.k.a. the Big Apple) for using an apple logo as part of it's Green New York campaign. The two logos are displayed below, and clearly, they aren't anything alike. It's also hard to believe that anyone would possible confuse the two and walk into a New York City bus shelter looking to buy an iPod, but apparently, Jobs and Co. believe this. Fortunately, the Big Apple's legal counsel has filed a countersuit asking the courts to dismiss the Jobs suit.

Good News Bad New

There was good news and bad news on the patent front today.

The bad news was a ruling by District Judge James Cacheris permanently enjoining the USPTO from implementing proposed rules that would have made it significantly more difficult for firms or individuals to obtain apply for large numbers of patents. These rules would also have limited the number of continuations a patent applicant could request to 3. Both of these rules are viewed by IP reformers as important changes that would make it more difficult for patent trolls to operate. The limit on continuations would significantly reduce the incidence of submarine patents.

Of course, the patent bar and their lobbyists are overjoyed with the news.

On the good news front, via Janis Fraser's article in Genetic Engineering and Biotechnology News, the USPTO has issued a ruling on the obviousness of genes that reverts to a previously used criterion, based on the Supreme Court's ruling last year on the general issue of the obviousness defense against infringement. The old criteria for when a gene was obvious was whether there were existing procedures for cloning it. In 1995, the Court of Appeals for the Federal Circuit changed the rules by adding the criterion that the nucleotide sequence of the gene be "predictable" based on current science. Since these sequences are almost always unpredictable, this raised the bar on the obviousness defese significantly.

The Supreme Court's 2007 ruling in the KSR v. Teleflex case (which involved the question of whether reinventing a car gas pedal was obvious or not) raised a number of very broad issues regarding the obviousness defense, and it is these issues that have led the USPTO to reinstate the old rules on when a gene is obvious, despite the CAFC's '95 ruling. Whether the rule change sticks remains to be seen.

Patently Corrupt

Via Kevin Drum, the excerpt below from a story by Shannon Brownlee in the Washington Post describes how the pharmaceutical industry creates "diseases" in order to increase sales of their patented drugs.

Condition branders use "information" about medical conditions to forge links between disease and treatment in the minds of both patients and doctors. If they have a drug but no condition, they will simply invent a disease.

....One of the best examples is "osteopenia," a diagnosis that millions of women my age are given every year.....Before the 1990s, doctors decided that you had osteoporosis if you were elderly and you broke a bone. When the pharmaceutical company Merck came up with its anti-bone-loss durg Fosamax, it wanted a broader market than just elderly fracture patients. The solution? The company helped fund a panel of medical experts to create diagnostic criteria for osteoporosis so that a diagnosis could be made before the patient actually broke a bone.

The panel's first step was to define "normal" bone density as that of the average 30-year-old woman. Next, the experts chose as their cutoff for osteoporosis a statistical point that was slightly below the bone density of their normal 30-year-old a definition they admitted was "somewhat arbitrary." Finally, they came up with a completely new disease osteopenia for bone density that fell somewhere between that normal 30-year-old and their arbitrary definition of osteoporosis.

Voila 30 percent of post-menopausal women suddenly had a disease that needed to be treated early in order to prevent a problem hip fracture that wouldn't occur for many years, if ever. According to the new guidelines, millions more women now had osteopenia, which their doctors needed to watch like hawks so that their patients could be treated once they progressed to osteoporosis. Merck then took the added step of helping doctors buy DEXA scanners, X-ray machines needed to scan your bones to get that all-important diagnosis.

Monopoly corrupts. Absolute monopoly corrupts absolutely.

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Most Recent Comments

The right to rub smooth using a hardened steel tool with ridges Finally got around to looking at the comments, sorry for delay... Replying to Stephan: I'm sorry

Let's See: Pallas, Pan, Patents, Persephone, Perses, Poseidon, Prometheus... Seems like a kinda bizarre proposal to me. We just need to abolish the patent system, not replace

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Les patent trolls ne sont pas toujours des officines

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Bonfire of the Missalettes!

Does the decline in total factor productivity explain the drop in innovation? So, if our patent system was "broken," TFP of durable goods should have dropped. Conversely, since

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