The Failed Promise of Patents

Some say that patents are a prohibition on competition against an inventor, but I believe that patents very much prohibit cooperation among innovators. With regard to disclosure of the invention, the general consensus among many who do read patents is that they incorporate language that is so broad and vague, it is often hard to determine just what invention is actually disclosed. That vague language prevents cooperation among innovators with fear, uncertainty and doubt.

To put it differently, a person practiced in the arts described by a patent would be hard pressed to recreate the invention disclosed by a patent. This is particularly true of software patents which are so general as to be a patent on an idea rather than a specific invention. The goal in writing patents, it seems, is not to disclose the design of an invention, but to get a private monopoly on an idea.


Patent apologists implore us with the notion that without patents, inventions would not be disclosed, keeping inventions secret. The technology available today allows for reverse engineering down to a very minute scale. Given enough incentive and eyeballs, an invention will eventually be reverse engineered, and 99% of the time, we have the resources now to do it. Note how every DRM system ever released has been broken. There is even recent news of a workaround for HDMI encryption.


Besides, an invention with a design that is unavoidably disclosed is ripe for sharing anyway. The best that any inventor can hope for is good execution for the first mover advantage, even with a patent. The first few years of sales with very good execution and manufacturing will provide plenty of revenue to cover the costs of development.

Until I see conclusive evidence that patents have been a net positive for society, I remain unconvinced. Patent defenders will often point to the innovation we have seen so far, but that is innovation in *spite* of the patent system. I think they would find it difficult to show even one patent that has not hindered follow-on innovation or one that provided society with more wealth than the patent owner has gained. In sum, patents are great for litigation, not so great for innovation.

Patent Transparency

The news about Linux and Android technology is rife with stories about attacks against free software by Microsoft. The latest trend is that Microsoft has been threatening all of the major Android cellphone  manufacturers with patent litigation. To prevent litigation, Microsoft coerces Android manufacturers into entering a very restrictive license agreement with the understanding that the terms of the agreement cost less and have less uncertainty than litigation.

There is one really big problem with all of these agreements: they're all confined to secrecy through non-disclosure agreements. Through these patent licensing agreements, Microsoft is imposing their tax (alleged to be as high as $15 per unit on cell phones) on a free, open source operating system they didn't even build. This is the cost of knowing what those patents are and the cost of being "covered" by a license to practice those patents, even if they're not being practiced by the victims.

The purpose of the high licensing fees is to impose a cost on an otherwise free work of software that is greater than or equal to the cost of a Windows phone license. In other words, the message is, "Android? Say, that's a very pretty operating system you've got there. I'd hate to see anything bad happen to it. I think you'd be a lot safer if you paid us for protection and built Windows phones, too." Does the image of Marlon Brando come to mind?

Microsoft's strategy is simple on it's face: Approach a competitor with threats of a patent lawsuit. Then offer a way to eliminate the threat, but discussions only begin with a non-disclosure agreement. This way, even if negotiations fail, the patents are never revealed. It's important to keep those patents secret to prevent competitors from working around the patents. As negotiations continue to success, the result is a royalty agreement in complete secrecy, ensuring that no one else knows which patents are included or their true value based on the agreement.

This practice can be used anti-competitively and Microsoft isn't the only one doing it. To put this in perspective, in a competitive market, competitors strive to offer a better product to consumers based on price, product quality and customer service. In a combative market, participants seek to hobble or even disable their competitors to assert a private monopoly on the market. Patents were never intended as legal weapons of combat in the marketplace. They were only intended to give inventors access to capital to practice their inventions, but that's not how they're being used in business today.

It's time for some patent transparency. Patents are government issued grants of intellectual property and each patent is a matter of public record so anyone can look them up at the USPTO website (Google has just introduced a new patent search engine, too). Each patent is a monopoly on an invention. Patents are also assets that tend to substitute for research and development and customer service. Unfortunately, many patent owners have set up a shell game of corporations to make it hard to trace the true owner of the patents.

So I have a solution: all patent licensing agreements may not be kept secret by any non-disclosure agreements and that there should be no exceptions. Investors, public or private, have a right to know the true value negotiated for a patent. Investors have the right to know the impact on their investment when the company they invest in is approached by a patent aggressor, like Microsoft, or IBM, the king of patent licensing.

This proposed law should cover a few basic points. All patent licensing agreements, including out of court settlements (95% of patent cases settle out of court), and court orders, are to be made public and shall be registered with the patent office. The patent office must be notified in advance that patent licensing negotiations are about to begin, with notice of time, place and scope to ensure they eventually get a copy of the agreement resulting from negotiations. All patent agreements shall be made public in reports made to the Securities and Exchange Commission by publicly traded corporations. Any person or company contacted by a patent aggressor for royalty negotiations that are subject to a non-disclosure agreement will have standing to sue for relief. Finally, provide for refunds of all patent costs to the licensee should the patent be ruled invalid prior to expiration of the patent.

The penalty for failure to comply is termination of the patent. That should create plenty of incentive for compliance on the part of patentees.

The public has a right to know how government issued monopolies are being used to stifle competition and remove choices from the market in favor of patent owners (sometimes affectionately referred to as "patent trolls"). Removing the veil of non-disclosure agreements from patent licensing agreements will create greater transparency in a very murky market.

Moreover, competitors have a right to see how patents are being enforced in a particular market segment. With access to these agreements, competitors can see how the agreements are structured, what rights are conferred and determine the costs of entry to the market affected by a patent. They can also find ways to work around the patents to secure entry to a market without having to risk litigation first. Transparency will allow competitors to be sure they aren't infringing on patents, which is the point of patent publication in the first place.

Some are sure to cry foul. "Patents are private property! You can't do that!" Are they really? Patents are issued by the government as a temporary monopoly to the patentee. Patents are the only kind of "property" that allow you, the patentee, to tell others what they can and cannot do with their own private property. Clearly marking the true owners, the limits of the patents and the agreements relating to their licensing has no bearing on the value of a patent and would actually increase the value of the patent to the owner and society.

Congressional intent is that patents should promote the progress of the arts and sciences. A non-disclosure agreement is a sure sign that a patent aggressor has little interest in advancing the arts and sciences and is overtly thwarting the intent of Congress. It's worth noting that there is is a lot empirical evidence to show that patents have never encouraged innovation, much less advanced the progress of the sciences or the arts.

A closer inspection of patents as "property" reveals broad, general language as to the scope of the patent, making it difficult to tell where the patent begins or ends. Try reading a patent, especially a software patent, to see how it is practiced, or even how to avoid infringement. You're going to need a lawyer to help you. Even for engineers, this can be a hopeless quest.

Real property on the other hand is easier to understand. There are clear boundaries to real property and those boundaries are very well established so that everyone knows the limits of a property claim. Car ownership is just as easy to prove. But the metes and bounds of patents are about as clear as pea soup.

The law as it currently stands is very one-sided in favor of patent holders. In order to help weed out bad patents, there needs to be some penalty for gaming the system. What happens if a patent covered under a licensing agreement is eventually invalidated before the patent expires? My proposal takes this into account by providing civil remedies for a refund of all royalties paid, legal fees and other expenses resulting from any negotiations, agreements or litigation arising from enforcement of the patent upon the plaintiff. Criminal remedies shall be available in situations where the former patent holder fails to refund costs.

Because ex post facto laws are prohibited by the Constitution (and I'm not advocating them here), there is nothing we can do about the patent agreements already in force. But the points above would go a long way towards cleaning up the fear, uncertainty and doubt in the marketplace. Perhaps we can create a voluntary patent licensing exchange so that anyone who wants to disclose previous agreements can do so, as an act of goodwill.

It is estimated that innovation has contributed 90% of GDP since 1870, with the vast majority of that innovation covered by patents issued by the government. We the People have a right to know how the patents are being used to control markets since they have a material impact on the well being of all of us.

Patents have no place in a free market. But as long as we have patents, transparency in patent royalty negotiations is essential to regulation of their use and maintaining choice in the market for consumers.

A Letter to my Congress Critters: On Copyrights

Dear Representative, 

The E-PARASITE Act and the PROTECT-IP Act, collectively known as the Internet Destruction Acts, represent yet another attempt by Big Content to impose their aging business models onto the Internet. Big Content has seen fit to fashion legislation in their own image, for their own benefit, without regard to the public. In recent years, Big Content has made steady encroachments onto the Public Domain through legislation and through misappropriation. They seem to think that consumers have no rights with regard to content, such is the attitude expressed in these Internet Destruction Acts.

These acts set aside due process rights in favor of the rights of Big Content. They set aside First Amendment rights in favor of Big Content. And they seek to create a captured audience, unable to choose which media they wish to view and where they'd like to view it.  Though Big Content benefits from and even capitalizes on copyright laws, they seem to have forgotten who the copyright laws are intended to benefit:

"The sole interest of the United States and the primary object in conferring the [copyright] monopoly lie in the general benefits derived by the public from the labors of authors." --- Fox Film Corp. v. Doyal, 286 US 123, 1932

We the People, in the end, are the sole beneficiaries of the copyright laws. Not the multinational Big Content corporations who impose region codes on the DVDs they wish to sell, who issue DMCA takedown notices even in cases where their rights are not even proven, who have imposed DRM - a failed and broken technology that fails immediately when the authenticating servers are shut down, who have created secret agreements with Internet Service Providers to create a defacto 3-strikes law without the consent of the People and who have disregarded the will of the People at every opportunity to do so.

Big Content, and you, my representative, hear this: the only reason we still have copyright laws today is because it is the will of the People. As one of the People in this country, I urge you to vote no on these Internet Destruction Acts and others like it. They have no place in a free society. Remember, a free idea will create more jobs than an encumbered idea.

Scott Dunn

No PC Security in Vietnam

I've been on vacation in Vietnam for the last week or so. Before I got here, I recalled the state of the computers I've seen here during my last visit and came prepared this time. I brought with me Linux CDs and DVDs as well as a couple of USB drives to help the family with their computers. Today, I'm going to give a brief description of the state of the typical computer in Vietnam as I see them.

My findings are based on a pretty small sample of three computers. Despite the small sample, the uniformity of the install choices made, and the geographical disparity of all PCs suggest there is widespread agreement among the PC builders on how to best build a Windows PC. It seems that their highest priority is that the PC will function properly as a pirated copy of Windows. Every choice made by these PC builders leaves the user less secure, unable to recover Windows if the machine should fail, and more likely to fail due to the choices made. Unless otherwise stated, the conditions observed are seen in all three PCs.

First, not a single PC had a certificate of authenticity. You know that colorful little sticker you usually see on the side of your computer? That sticker is the license key for your copy of Windows. Having this key is absolutely necessary in order to install Windows and pass Windows activation. That sticker is your license for Windows unless you bought a boxed copy and left the sticker in the box. This condition leaves users unable to re-install Windows without having to take their computer to the shop so that a technician can do the work.

Automatic Updates were disabled. The obvious reason for this is to prevent Windows Genuine Advantage from being installed on the computer to check the validity of the license key on the computer. This leaves the user less secure against known security issues because Windows will not be kept up to date.

When Windows is installed for the first time, it creates a user account that is usually the administrator account for the machine. After the installation is complete, the computer will reboot and then walk you through setting up user accounts and Automatic Updates. The user accounts that are setup here are also administrator accounts. Administrator accounts have full control of every process and file on the computer.

Most Windows users are unaware of this condition, and they do not know that they should be running as users, not administrators. This is important because of the way malware installs on a computer: silently. If you are running as admin while browsing the web, and you encounter malware, or a "drive-by download", the malware will install on your computer without you even knowing what happened. After that happens, the only clue is that your PC is running a lot slower than before.

Next up is the file system. By default, Windows will format a hard drive using NTFS. NTFS assigns access controls to each folder and file. This security information assigns access permissions to each file and folder, allowing users to access their own files and prohibiting user access to files that are not theirs. This is important for security in that it prevents viruses from accessing system files and changing them - if you are not running as an administrator account.

Here in Vietnam, it is common practice to install Windows to a FAT32 file system. Some of you may find that the term "FAT32" is familiar. Some of you might even remember that FAT32 was a feature in Windows 95 and 98. Unlike NTFS, FAT32 provides no access controls to files and folders in the file system. This means that even if you are not using an administrator account, you still have access to every file on the system and can change or delete them at will (and at your own peril).

Taken together, all of these conditions add up to one very insecure computer, even with antivirus installed. The FAT32 file system allows non-administrators to access system files and change them. User accounts are admin accounts and Windows Update is disabled. This is a playground for botnets in Asia created for the very purpose of pirating Windows.

When people pirate Windows, they fail to realize the true cost of using pirated Windows. To prevent piracy, I recommend installing Linux (like Mint, or Fedora). Linux has a few qualities that you won't find in the way Windows is installed here. With Linux, you get file and folder security by default. You don't run as admin by default. And you get automatic updates by default without having to worry about Windows Genuine Advantage consuming your time and money.

Some people are starting to wake up and smell the choices, however. By one estimate, there are more than a thousand Linux users in Vietnam. I'm gonig to do a conversion today from XP to Xubuntu. Even the Vietnamese government has taken note of the opportunities afforded by Linux. Many small countries from around the world, including Vietnam, see Linux as a opportunity to create their own software industry. Linux is also a way out of dependence on Microsoft and other American software vendors. In fact, Microsoft depends on piracy to survive.

So get safe, get legal and get Linux, Vietnam.

The Linux Debates

There is a debate within the Linux community concerning which office suite is better?  OpenOffice or LibreOffice? There is another debate about desktops. Which one is better?  GNOME or KDE? How about XFCE? Who cares?

I'm really quite oblivious to the debate and have been for the four years I've been on Linux. What matters to me is the incredible variety and number of applications to choose from. And I'm not just talking about what you see on the desktop.

Let me give you an example. I got curious about the QR code, a barcode that most modern smartphones can read, and wanted to learn more.  With a little digging, I found a nifty little utility, QRencode for Linux in the package manager. In a few minutes I had it installed, with web pages on how to use it in front of me.  In a few more minutes, I had created my first QR code and tested it on my phone to be sure that it worked as promised. It did.

While I happen to prefer GNOME, the experience I shared above was possible irrespective of the desktop used. That experience didn't tell me whether or not one desktop is superior to another. But it does tell me that Linux is a hell of a lot more exciting to me than Windows or Mac. Discoveries like QRencode are priceless and they just don't happen on Windows or Mac.

Whether I use GNOME, Unity or KDE, or some Office suite we haven't heard of yet, those itty-bitty utilities are what make Linux so exciting to use. That makes Office suites and desktop arguments really boring. Having said that, I appreciate the diversity in desktops and office suites available to Linux that I might not be able to enjoy on Windows or Mac.

Republicans Vote To Authorize Endless War

A letter to Jason Chaffetz, who represents my district in Congress:


Mr. Chaffetz,

If you come home to tell us that the Democrats don't have a plan, I for one, will consider your conclusion as a ruse.  Republicans hold the purse strings for now, and we can be sure that if the Democrats had a plan, committees with Republican majorities will never let a Democrat plan out of committee.  We all know your plan to end Medicare as we know it, has been pitched as a plan to save it.  It is really a plan to shift the cost of care for our seniors from government to them.  Under your plan, the cost of healthcare will leave little room left for anything else for tomorrow's seniors.  Few have seen it as a plan to divide the vote and pit the young against the old, but that's what it is.

I see also that the ACLU has reported that the latest defense authorization bill will permit "endless war", ostensibly as a way to stimulate the economy.  We know from eight long years of Bush rule, that war doesn't create jobs.

Say what you like, but I will be telling my friends that the Republican plan is a plan to send income upwards.  It's a plan that will permit a further concentration of wealth into the hands of just a few men and women who think they know what's best for us.  You, sir, are going to help create a Banana Republic at the expense of the everyone else.

So I ask you, have you noticed that the United States became the most powerful economy on the planet when the top marginal tax rate was 90%?  Perhaps you could try raising taxes to close the deficit.  Think about that.

Sincerely,

Scott Dunn

CEO pay tops pre-recession levels

The Associated Press is reporting that in 2010, the CEO's of 334 of the corporations listed on the Standard & Poor 500 raked in 24% more than the previous year and more than in 2007, before the Great Recession began.  According to the article, the highest paid executive was Philippe Dauman of Viacom, with $84 million.  The average pay, including all forms of compensation was about $9 million.  Aren't we *still* in a recession?


Why yes, we are, if you're an employee.  Average employee pay increased by only 3%, and topped out at $40,500.  Employees are apparently being told that due the weak job market, they can expect lower pay.  So the board of directors at the largest corporations have no qualm about paying CEOs more money during a very deep recession while at the same time holding the line on wages for employees.  How...consistent.


Top management will be the first to insist that if we just lowered the tax rates, they could create more jobs.  But economists have documented in detail how tax rates are lower than they have ever been in 80 years.  Despite these low tax rates, particularly during the Bush years, we have seen fewer jobs created than when tax rates were much higher.  In fact, we're experiencing an essentially jobless recovery and have been for two years.  We have decades of empirical evidence to show that lower taxes do not lead to more jobs, simply because they are as low as they are ever going to go.


I have a theory about why the economy is growing so slowly.  Currently, the top 10% own more than 85% of all the wealth, you know, like in a Banana Republic. Most of that wealth is socked away in securities like government bonds, stocks and real estate.  The same top 10% have all the money they want and don't really need any more for survival - this is especially true for the top 1%.  At that point, their choices for entertainment become limited.  They may find that competition is too tough, so they sit on their money taking dividends and interest.  With enough money socked away into investments, it becomes a full time job just to manage the funds.  


Are they working?  Are they creating wealth?  Are they asking for tax cuts?  Maybe, probably not, and yes.  They're working if they're managing their funds, but are they helping other people or maximizing their profits?  They're creating wealth if they're actually creating something other people can use.  But given the current conditions, with so much wealth cornered in the top 10%, the name of the game is wealth extraction because there is simply too much competition for wealth creation.  That's because most of the wealth is locked up somewhere, and that's why when the Federal Reserve Bank tries to inject "liquidity" in the market, it does little good, remember, interest rates at the discount window are near historic lows.  When the Fed makes more money available to loosen up the economy, the top 10% is right there at the spigot, capturing as much as they can before it can even get to the middle class.


Members of the top 1% club hate inflation.  That works against their investments and their dividends. If inflation is what we get when there is too much money floating free in the economy, then the opposite is when the money is locked up in long-term investments where it won't create jobs.  Get my drift?  Creating jobs would fuel inflation by putting money into circulation, and that is adverse to the interests of those who would prefer to sit on their money - that top 1% again.


Now about those tax cuts.  We see Private Ryan asking for tax cuts in the House, with a request to lop 10% off the top marginal tax rate of 35%.  His justification is that cutting taxes will create jobs.  But, as mentioned before, cutting taxes for people who already have money is like offering a drink to a man who already owns a bar.  Giving tax cuts to the to the top 10% doesn't mean they will spend more money.  As Robert Reich is so fond of saying, "they've already spent all the money they want to spend." It is worth noting that American became the greatest economic power on Earth when the top marginal income tax rate was at 90%.  


I'm not exactly sure what the solution is, but I know for sure it isn't tax cuts as the Republicans propose.  Democrats and Republicans worked together to give us budget surpluses by 1992.  We can do it again without having to gut the government or send the middle class packing.  The extreme concentration of wealth has set all of us against each other.  With fairer taxation we could put more money into circulation to rebuild the economy, and help us all to cooperate together, again.