VernonNemitz's Journal: On Defining a "Fair Reward" for IP

Innovation, Patents, Copyrights and Fair Rewards vs. Time, Population, Communications and Fair Use

While the fundamental rationale for the existence of Patents and Copyrights has not changed since their inception, there is today a widespread perception that "the System is broken". Innovators are claiming to be harmed as much as helped by that System, for example. In this Essay an attempt is made to show that the major causes of that problem are population growth and communications speed, and a remedy is proposed.

(Part I) A Tale of Two Eras
A look at a history of Patent Law reveals that the idea may have existed since the days of ancient Greece. And Copyright Law is basically a derivation of Patent Law, a direct result of the innovation of the printing press, which made it easy to copy documents. One thing to note is that the Term of a Patent or Copyright has varied considerably in different times and places. Regardless of the details, it is well known that the overall Goal of a Patent or Copyright Term is to provide the innovator with the opportunity to earn a Fair Reward for the effort of creating the innovation (regardless of whether it was a gadget or a story).

Let us now examine some details regarding how that Fair Reward typically was obtained. Then as now, an innovator needed to produce copies of the innovation for sale, and also find a way to let people know it existed, so that they might decide to buy one (or more). Now take a look at the graph on this page, regarding the overall population growth of the human species. It is obvious that for a long long time population grew quite slowly. Next, take a look at the history of communications --it is just as true that for most of that same long long time, ideas could not spread much faster than a horse could run.

The Logical Conclusion is that it was worth granting a Patent or Copyright for a number of years, simply because it could easily take that long for an innovator to receive a Fair Reward, the result of slow communications and low population.

The next aspect of the overall "System is broken" problem relates in a different way to population and communications. It is well known that the majority of innovations build upon something (or some things) that had previously been invented. One of the most famous ways of expressing that fact was penned by Isaac Newton. So, the first relevant point is that even a genius of Newton's caliber needed access to previous discoveries/innovations. The second relevant point is the fact that several decades passed after those discoveries were made, and before Newton began to build upon them. What if some other genius had come along before Newton, and had encountered the same discoveries from which Newton had derived his innovations?

That Question brings up the relevant factor of population --not everyone is a genius, and especially not everyone is a genius of Isaac Newton's caliber. We may now switch from the specific case just mentioned, to the more general case of a more ordinary innovation, because even ordinary innovators do not make up a large fraction of the population. Logically, therefore, when the population is small (and the total number of innovators is low) and communications are slow, it can take considerable time before Innovation A --or some portion of it-- becomes incorporated as a part of Innovation B. Thus we might see little conflict in the notion of granting Patent or Copyright protection for several years, simply because of the low probability that someone would immediately derive Innovation B from Innovation A.

On the other hand, due to various random factors, it might only take a few days for Innovation B to be imagined. This is where the doctrine of Fair Use becomes relevant (more-so for Copyrights than for Patents). The most important fact is that Ideas are not protected so much as Implementations of those Ideas. Therefore, because it might be impossible to copy an Idea without also copying some of its Protected Implementation, the Law allows a minimal amount of copying (the exact amount of which, of course, frequently becomes the subject of a legal dispute).

Fast-forward to today's Era.

One of the most important and gaining-ground technologies is called "3D Printing" or "additive manufacturing". This technology is going to force a merging of Patent Law with Copyright Law, because the plans that get fed into such a Printer might be covered by Copyright Law, but the thing that gets Printed could well be covered by Patent Law --and the two Laws have very different Protection Durations, which can only lead to confusion and more legal problems, in the absence of merging the Laws.

Next, today's population and communication situation is such that it is possible for hundreds of millions of people to learn about an innovation within hours or days of its announcement. Since such a population quite naturally includes a great many more innovators than in the earlier Era, Innovations B, C, D, and others can quite quickly be derived from Innovation A. While this is the simplest and most obvious explanation for the rate of today's technological progress, it also explains why many of today's innovators think "the System is broken" --they want to be able to sell their Innovations B, C, D, ..., almost before the ink or paint has dried on Innovation A, and they can't do it easily because the Patent and Copyright Laws, protecting Innovation A, were designed for a low-population-and-slow-communications Era.

(Part II) Toward A Modest Proposal
It may now make sense to think again about that earlier Era, and ask a Question: "How should the Fair Reward be measured?" If an Innovation Protection Term length was, for example, 20 years, that did not actually equate to money earned --it was merely an opportunity to earn money without competition for that length of time. Well, how much could actually have been earned in that Era, for 20 years???

A number of factors must be included in any attempt to Answer that Question, of which "production cost" and "sales price" are probably the most important. Those things not only directly relate to profits/earnings, the sales-price alone directly affects the Popular Demand for the innovation. If you invent an earth-moving machine and must sell it for twenty times an average person's annual wage, you will have fewer customers than if you sold a child's-toy version of the device, for an equivalently small price.

Another factor is Economic Inflation, because prices might not stay fixed for the duration of an Innovation Protection Term. Inflation basically makes it worthless to talk about fixed monetary amounts of earnings. On the other hand, the modern Era has given us plenty of experience with Inflation, and there are known/accepted ways of dealing with it, such as automatic price adjustments, indexed to the Inflation rate. And there are other ways of describing an income that don't reference monetary amounts at all. The description "life-style" can imply anything from "impoverished" to "super-rich" --and the phrase "maintaining a life-style" manages to convey the concept of "earning enough money to do that" without being specific as to quantity.

So, suppose we re-considered the Fair Reward for an Innovation in terms of "maintaining a life-style". In that earlier Era, and assuming a particular Innovation sold to moderate degree, with zero Inflation, how many years might the Innovator be able to support a modest life-style from the total Protected-Term proceeds of the Innovation? (In other words, gather up all the sales data for the Protection Term, figure the profits, and then see how many years of life-style could those profits support.)

For the purposes of this Essay a numerical value is now needed, but we can use the Rules of Algebra to call it "X years", and a great deal of historical data should be processed in order to arrive at the actual appropriate value of "X". Keep in mind that there could be considerable Debate regarding the known fact that something like 90% of all Innovations fail to earn a dime --should they be included in the historical calculations of a maintaining-a-modest-life-style Fair Reward?

The result of the preceding gives us an easy way to re-phrase a Patent or Copyright Protection Term. An example of such a re-phrasing might be this: "The Protection Term ends when you have earned enough to maintain a modest life-style for X years." Economic Inflation is almost automatically include-able in the figurings. And if the word "you" is taken to reference either Singular or Plural, then if an Innovation Team created the Innovation, the Fair Reward would apply to all the members of the Team, not just one person. "You" might even refer to everyone in an entire corporation, but care must be taken to ensure that nothing like Hollywood Accounting is employed to cheat.

The best part of this Proposal is that it applies equally well to both the low-population-and-slow-communications Era and the high-population-and-fast-communications Era. In today's Era a newly-released Innovation might only have a Protection Term of 3 days, if so many items were sold in that time such that the profits could meet the "maintain-a-modest-life-style-for-X-years" condition. Please keep in mind that the Original Goal was to provide a Fair Reward for Innovation , not for Greed.... In what way does this Proposal fail to offer a Fair Reward for Actual Innovation?

In closing, we can now re-consider Innovations B, C, D, ..., derived from Innovation A. If the Protection Term for Innovation A really-in-practice often is able to shrink from years to weeks or even days, because of the rate-of-sales associable with today's large population and fast communications, then it becomes quite easy for the later Innovators to wait for their own Fair Rewards, instead of feeling that "the System is broken".