10% Patent tax , a suggestion

Capt'n Midnight

At present a patent gives someone a monopoly on an invention provided they share with the world the information. There are countless examples of this monopoly being abused and many court cases delaying introduction of new technology. And let's not get started on generic medicines.

The other problem with patents is unpredictable costs of patent battles.

So instead of a monopoly I propose that there would be a flat rate tithe/patent tax at point of sale of say 10% on the retail cost of products that have patents. This would be collected and divied out to the rights holders in proportion in a similar same way to the way IMRO does with music.

This means that anyone could use any patents any time. It would mean the legal wrangling about the contribution of each patent would be over the pot of cash after the products have gone on sale and not before their introduction.

The usual rules of below cost selling and anti-dumping would apply , but nothing new here. If a product has no patents then there would be no tax. if a manufacturer already owns most of the patents, then they can use the patent tax income to reduce the cost of the product. Manufacturers would state if patents apply to each product, they should already know this. If they get this wrong then the penalty would be 10% of the retail price. Of course this would be shared between all the rights holders, possibly including themselves. This would mean worst case damages would be known in advance even if the lawyers take years to agree. So far less risk and uncertainty.

The downside is that for the rights holders they could no longer assign arbitrary values to patents as they would be more or less capped at 10% of the retail price of the most efficient manufacturer.

For the small inventor it means that if you develop a widget and it's being exploited on the market you would go to the organisation collecting the tax and they would pursue the manufacturer on your behalf, same as if you heard your song on the radio. No need to risk your house on legal fees or be out-lawyered by the corporates.


The collecting agency and perhaps governments would take a slice of this new income stream.

Any thoughts ?

Offy

Capt'n Midnight wrote: »

At present a patent gives someone a monopoly on an invention provided they share with the world the information. There are countless examples of this monopoly being abused and many court cases delaying introduction of new technology. And let's not get started on generic medicines.

The other problem with patents is unpredictable costs of patent battles.

So instead of a monopoly I propose that there would be a flat rate tithe/patent tax at point of sale of say 10% on the retail cost of products that have patents. This would be collected and divied out to the rights holders in proportion in a similar same way to the way IMRO does with music.

This means that anyone could use any patents any time. It would mean the legal wrangling about the contribution of each patent would be over the pot of cash after the products have gone on sale and not before their introduction.

The usual rules of below cost selling and anti-dumping would apply , but nothing new here. If a product has no patents then there would be no tax. if a manufacturer already owns most of the patents, then they can use the patent tax income to reduce the cost of the product. Manufacturers would state if patents apply to each product, they should already know this. If they get this wrong then the penalty would be 10% of the retail price. Of course this would be shared between all the rights holders, possibly including themselves. This would mean worst case damages would be known in advance even if the lawyers take years to agree. So far less risk and uncertainty.

The downside is that for the rights holders they could no longer assign arbitrary values to patents as they would be more or less capped at 10% of the retail price of the most efficient manufacturer.

For the small inventor it means that if you develop a widget and it's being exploited on the market you would go to the organisation collecting the tax and they would pursue the manufacturer on your behalf, same as if you heard your song on the radio. No need to risk your house on legal fees or be out-lawyered by the corporates.


The collecting agency and perhaps governments would take a slice of this new income stream.

Any thoughts ?

Good idea but I dont think it would work as nobody would have exclusive rights with such a system.

PogMoThoin

We certainly need a new system, patents are now killing the one thing they set out to protect, innovation.

Welease

Sorry, I don't like the idea.. If an investor comes up with new IP that falls within patent rules, then they alone should decide how that IP can be used.

Some technologies can cost hundreds to millions to invent and develop (especially drugs) especially with the change in US patent rules whereby the inventions must actually exist .. to slow patent hoarding. That money needs to be regained before the inventor can reach an even playing field with those who under your proposal would pay a 10% surcharge for rights to use the IP.. In many cases, your proposal would have the opposite effect and it would be cheaper to wait for someone else to develop the technology and utilise the cheap license instead..

Chuck Stone

Yeah good post.

I would suggest that a small tax on all products (maybe even one cent) goes into a prize fund for new inventions and discoveries - the prize fund would have a float of maybe 500 million dollars.

That would do away with the monopolies granted at the expense of us all.

Sky King

They got rid of tax free royalties on patents last year so they did, which is kinda the same thing, is it not?

Robdude

I'm not saying your suggestion isn't a good one but....my god...aren't there enough taxes in Ireland?

I don't mean this to sound disrespectful but I feel like we should stop looking for things to tax and start looking at why the taxes we already have aren't 'enough'.

CatFromHue

This would seem like a tax on ideas. That's not very fair if you ask me.

If you put a 10% tax on products that have a patent will that not make the product 10% more expensive? Also the product would have VAT on it as well. That's if I'm following you right.

Also I'm not 100% up on patents but can I skip Ireland altogether and register the patent with a European Patent body instead? Thereby skipping the Irish patent tax altogether.

Coriolanus

There's a new European patents body in the process of being created.
Currently if an invention is deemed of sufficient public necessity then a monopoly isn't created. Anyone can use the tech albeit having to pay the creator. See the recent case in Germany with Apple vs Motorola. The patents were owned by MOTO but the issue wasn't with Apple violating them but with their non payment to MOTO.

Capt'n Midnight

Welease wrote: »

Sorry, I don't like the idea.. If an investor comes up with new IP that falls within patent rules, then they alone should decide how that IP can be used.

Some technologies can cost hundreds to millions to invent and develop (especially drugs) especially with the change in US patent rules whereby the inventions must actually exist .. to slow patent hoarding. That money needs to be regained before the inventor can reach an even playing field with those who under your proposal would pay a 10% surcharge for rights to use the IP.. In many cases, your proposal would have the opposite effect and it would be cheaper to wait for someone else to develop the technology and utilise the cheap license instead..

Gernerally speaking big pharma spends three times as much on advertising than they do on R&D

If you have a link to show that the patents must exist I'd be interested.

http://www.theregister.co.uk/2006/03/13/br_flying_saucer/

British Rail patented a design for a flying saucer powered by thermonuclear fusion back in 1973. ... "The thermonuclear fusion will take place in a series of pulses, each pulse being triggered by laser energy, and/or energetic particles reflected from a previous pulse. The system will be arranged so that the fusion process will decay after each pulse so that the stability of the system is maintained."

http://www.patentstorm.us/patents/5527628.html
The application claim of this patent states that even a finished solder joint is covered by the patent. Therefore, if one of these non-patented alloys is used and during manufacturing the alloy “picks up” copper (which normally does occur) and forms an intermetallic that contains the elements covered under the Iowa State University patent, the manufacturer has violated that patent. Although this will be difficult to enforce, manufacturers should be aware of this potential for patent violation.

Love that because there are probably Billions of examples of prior art in pre-existing solder joints

Capt'n Midnight

CatFromHue wrote: »

This would seem like a tax on ideas. That's not very fair if you ask me.

and existing patents aren't a tax on ideas ??

more importantly existing patent holders can suppress the expression of those ideas. At present if you patented a cure for AIDS then you can stop others using it.

If you put a 10% tax on products that have a patent will that not make the product 10% more expensive? Also the product would have VAT on it as well. That's if I'm following you right.

The most expensive component in a DVD player is the patent. Same is true of US tv decoders, cheap mobile phones , the list is endless. This would replace that existing charge with one capped to 10%.

The key point is to get the innovations usable by everyone sooner. With the pace of technological change having lawyers tie innovations up for years just isn't fair.

Welease

Capt'n Midnight wrote: »

Gernerally speaking big pharma spends three times as much on advertising than they do on R&D

To my mind, somewhat of an irrelevant argument.

For clarity, I don't believe there is any right or wrong stance in these discussions, merely an option which will be somewhat based on people tolerance level of capitalism

My point is.. Would there be such a private sector spend on cancer cures etc (or any non drug related design,) if once patented your invention was open to be made cheaper by other companies.. It would be nigh on impossible for the small/medium size company to compete on designs they sweated blood and tears to develop, as they would be unable to compete on the mass production of those products.. The reward for colossal risk would be non existant.

Capt'n Midnight wrote: »

If you have a link to show that the patents must exist I'd be interested.

http://www.theregister.co.uk/2006/03/13/br_flying_saucer/

http://www.patentstorm.us/patents/5527628.html
The application claim of this patent states that even a finished solder joint is covered by the patent. Therefore, if one of these non-patented alloys is used and during manufacturing the alloy “picks up” copper (which normally does occur) and forms an intermetallic that contains the elements covered under the Iowa State University patent, the manufacturer has violated that patent. Although this will be difficult to enforce, manufacturers should be aware of this potential for patent violation.

Love that because there are probably Billions of examples of prior art in pre-existing solder joints

Actually on re-reading my use of the term "must" is somewhat misleading, I was referring to the existance of prior-art vs. first filing. If you have built it and got it working, you can still apply for "first to file" if you indeed did develop the design. But to answer your question, and expand on my response.. The US changed Patent laws in September for the first time in about 60 years.

"The new act, being politically presented as supporting American technology and creating jobs, addresses several key problems that remained a part of the patent process. One of the most significant changes is the establishment of a “First to File” standard for patent applications.Previously, the patent would go to the “First to Invent,” regardless of who filed the patent application. While at first blush, a first to invent standard seems fairer to competing or simultaneous inventors, the result put a significant burden on the PTO to determine who was the first to invent, resulting in costly delays and “inventorship fights.” Now the burden is on inventors to file their patent applications promptly. This provision is also more consistent with the patent process in many other countries and will make it easier for U.S. patent owners to obtain foreign patents for their inventions.
As a trade-off for those inventors who may have a competitive or commercial reason to delay the filing of their patent application, the act also gives a grace period if an invention is disclosed publicly. Their application would still be considered “first to file.” In addition, people who invent and use their invention in commerce but do not file a patent application were given additional protection against a subsequent inventor who does file. The prior inventors now have several additional defenses against a later patent applicant who would claim the earlier invention infringes on his or her patent.
A final trade-off, and a second major change, is an extension of the process of post-grant review of patents. These changes allow persons who oppose new patents for any reason—the invention wasn’t novel (a claim that could be used by an inventor who was not the first to apply for a patent) or did not meet the standard for “non-obvious”—to file an objection within the first 9 months after a patent is issued. Additional new processes and procedures will allow further reviews of patent application during and prior to patent infringement claims. The expectation is that questionable patents will have a harder time being granted and/or surviving patent infringement claims and other litigation."
http://newsbreaks.infotoday.com/NewsBreaks/Congress-Enacts-Patent-Reform-Legislation-77693.asp


As someone who regularily submits inventions to patent commitee's, I like the fact there is an element of protection for my effort and work.. And while I do understand the phylanthropic element of wanting designs to be freely available (cures for cancer), I do object to the bulk usage which is pure commercial in nature.. i.e. Company X doesn't lift a finger but wants to use a design they spend no time/effort in helping invent. If they want that technology, then they should spend the time and effort to come up with their own design or pay the licence fee.

Chuck Stone

Welease wrote: »

My point is.. Would there be such a private sector spend on cancer cures etc (or any non drug related design,) if once patented your invention was open to be made cheaper by other companies.. It would be nigh on impossible for the small/medium size company to compete on designs they sweated blood and tears to develop, as they would be unable to compete on the mass production of those products.. The reward for colossal risk would be non existant.

I heard a radio interview about how pharmacological innovation is stagnating for various reasons.

I don't see how a prize fund couldn't have the desired effect of stimulating innovation. If they levied a minuscule tax on medicines they'd quickly have billions in a prize fund.

Then the patent would be unnecessary and drug companies wouldn't be able to fleece people for 10 years.

Welease

Chuck Stone wrote: »

I heard a radio interview about how pharmacological innovation is stagnating for various reasons.

I don't see how a prize fund couldn't have the desired effect of stimulating innovation. If they levied a minuscule tax on medicines they'd quickly have billions in a prize fund.

Then the patent would be unnecessary and drug companies wouldn't be able to fleece people for 10 years.

But what would a prize fund be for and how would it be administered? I think thats a different proposition from the OP's tax (which as I understood it was to reimburse the inventor for loss of exclusivity rights to a patent)..

The problem with prizes and funds.. is that a) they are localised, so wouldn't apply in a global market, and b) more importantly, who gets to decide what is a worthy winner and based on what criteria?
It would end up being much like the Your Country Your Call prize fund... A buzz word bonanza..

Actually creating a working patent and bringing it to market is a prize fund in itself.. If its a good idea people will buy it.. If not, they won't.. It doesn't need an extra admin layer with arbitrary decisions on whats hot/whats not to drive innovation.

I don't see the problem with the current patent system.. If you spend the time and effort (and money) to develop something then you get to sell it or licence it out. The vast majority of inventors and companies want to make money so they are more than willing to allow their inventions to be used by others for a price. Those that don't should be allowed to decide how/where their invention is used, and by whom.

Chuck Stone

Welease wrote: »

I don't see the problem with the current patent system..

Here are the problems.

The current system is effectively granting a monopoly for a corporation. The corporation can then price gouge for ten years. The more vital the medicine the more evil it is to charge a price that is a multiple of what a free market would produce.

Medicine patents allow drug corporations to mark up sales anything from 200 to 5000 percent - that is just immoral.

The pharmaceutical industry justifies the vast economic waste associated with patent protection for prescription drugs by claiming that patents are necessary to finance research.

According to the pharmaceutical industry, it spent $41.1 billion on research in the United States in 2004.4 This means that the country spends more than three dollars in higher drug prices for every dollar of drug research supported through the patent system. The rest of the additional spending went to marketing, high CEO pay, and drug company profits.

But this picture is still far too generous to the patent system. As any good
economist would be quick to point out, government patent monopolies provide
perverse incentives to pharmaceutical companies. They want to maximize the
profits from these monopolies, which leads them to waste resources in ways
that would not make sense in a free market.

One way that the pharmaceutical industry wastes resources is by engaging
in copycat research, spending tens of billions of dollars developing drugs that
duplicate the functions of already existing drugs. For example, once Pfizer
developed Claritin, other drug companies rushed to develop comparable drugs
to cash in on Pfizer’s multi-billion dollar market.

This behavior makes sense when a government-granted patent monopoly allows Pfizer to sell Claritin at a price that is much higher than its cost of production. (Copycat drugs actually are desirable in a world with patent protection, since they provide some competition in an environment where there would otherwise be none.)

However, if Claritin were sold in a competitive market, it would make little
sense to spend money developing a new drug that did the same thing as Claritin.

According to the Food and Drug Administration, approximately twothirds
of all new drugs fall into this copycat category. The pharmaceutical
industry estimates that copycat drugs cost approximately 90 percent as much to research as breakthrough drugs, which means that approximately 60 percent of the industry’s spending on research is to develop copycat drugs (Ernst & Young LLP, 2001). This means instead of getting $40 billion in research on breakthrough drugs for the $140 billion that patents add to drug costs, we are only getting about $17 billion. In other words, we spend more than $8 in higher drug prices for every dollar that the industry spends researching breakthrough drugs.

The Conservative Nanny State p.50-51

Welease

Chuck Stone wrote: »

Here are the problems.

The current system is effectively granting a monopoly for a corporation. The corporation can then price gouge for ten years. The more vital the medicine the more evil it is to charge a price that is a multiple of what a free market would produce.

Medicine patents allow drug corporations to mark up sales anything from 200 to 5000 percent - that is just immoral.

It's not that simple..

The patent system doesn't just apply to drugs, and life saving drugs are completely different from consumer technology etc.

Is it immoral that I can't take an iPhone and churn out exact copies for a fraction of the cost that Apple sell theirs at? If I could, then what would be the incentive for Apple or any company to spend money developing new products?

Is it immoral that I want to protect my design from a multinational that can easily mass produce for 10% of my cost in China and put me out of business?

If the issue is with companies profiteering from life saving drugs, then the issue is more to do with greed than patents, and maybe in certain cases in life threatening cases then patents could/should be have further time restrictions implemented in them.. However, in the article you cited, how many of those companies would charge the "free market price"? Most will still look to make considerable profits despite their phylanthropic claims to others people's work.. (and how many of their own designs do they sell atr current free market value:)).

Those immoral claims in my mind do not however extend to consumer technologies etc. It's not life or death.. its features and functions.. and there is absolutely no reason why the small guy shouldn't have some form of protection.

Chuck Stone

Welease wrote: »

Is it immoral that I want to protect my design from a multinational that can easily mass produce for 10% of my cost in China and put me out of business?

You could sell your idea.

If the issue is with companies profiteering from life saving drugs, then the issue is more to do with greed than patents,

It's the monopoly that allows this to happen.

However, in the article you cited, how many of those companies would charge the "free market price"? Most will still look to make considerable profits despite their phylanthropic claims to others people's work.. (and how many of their own designs do they sell atr current free market value

I picked up 16 Paracetamol in Tesco in Birmingham a few weeks back. It cost me 15p. That's what happens when the free market is allowed to operate.

Those immoral claims in my mind do not however extend to consumer technologies etc. It's not life or death.. its features and functions.. and there is absolutely no reason why the small guy shouldn't have some form of protection.

I agree that people should be rewarded for innovation. I just think alternatives to state enforced monopolies should be explored.

Also it's the small guy who's getting wallet raped by these monopolies.

You know there's one multi-million dollar industry where there is no copyright or patent protection?

The fashion industry. You might have $3000 dress on show on the catwalk and within a few weeks a fairly similar version will turn up on the high street for a fraction of the cost and the state doesn't get involved.

Still very profitable business though so there are examples out there.

chocksaway

I know patents dont just apply to drugs but here me out:

I discover a potential new treatment for a disease based on screening against cells in a lab or what not. I then patent the treatment as well as any other potential modifiactions that i can think of- as long as they can be made. The patent then lasts for an average of 18 years.

So now I have to go and make these newer versions of the drug and test them out on more cells. This can take another two years or so.

Once I've found my best compound I have to start clinical trials. There are usually 3 phases. That is if it passes each stage. If it doesnt its back to the drawing board. This can take about 6 years.

Once its passed all the trails it must be approved for public use, which can take another 2 years.

So now I've used up 10 years of our 18 year patent and havent even sold any yet!

I now have anout 8 years to make back as much money as I can to get back all my expenses from the R and D, the trials, lab testing, new equipment, etc before I can start making money.

The average cost of bringing a new drug to market is from about 300 mikkion to 1 billion depending on methods and technologies used.

Thats alot of money I've to make back in 8 or so years before the generics companies can come in and start flogging it at cheaper prices(because they didn't have to do any R and D, trials, or whatever).

And then if there's a problem with the drug that shows up after the trails I up sh*t creek! I'll have lawsuits coming at me from all angles.

So really i think the tax/levy/whatever on patented stuff is a bit much if other companies can bypass the patent, especially as regards the pharamaceutical side of things!

But I'm all for it on the consumer goods side!

Welease

Chuck Stone wrote: »

You could sell your idea.

I could.. and they could also offer me a disgustingly low price safe in the knowledge that if I don't take it.. they will put me out of business anyway by mass producing at a cost I could never come close to..

Chuck Stone wrote: »

It's the monopoly that allows this to happen.

But a lack of a monopoly doesnt ensure lowest price availability either... The point I was making was.. companies will try to maximise the profit that a market can sustain. The health market is somewhat unique in that there is a moral element to what prices people are charging.. I understand people's revulsion at the profit levels there, but while I also would like to see a more realistic price involved, I don't believe the headlines of 2000-5000% actually tell any of the true story.. That is a profit level based on the production cost of that drug, but takes no account of the development costs of that drug, and the need to build up a revenue store for continued development and indeed costly failure of other research which never made it to market...

Chuck Stone wrote: »

I picked up 16 Paracetamol in Tesco in Birmingham a few weeks back. It cost me 15p. That's what happens when the free market is allowed to operate.

Yes, and No.. The NCI in the US alone spend about 4.9Billion on cancer research per year (http://www.cancer.gov/cancertopics/factsheet/NCI/research-funding).. Globally the amount must be colossal amongst private companies.. How could any of those companies justify the expense if other companies could spend nothing and dump out the drug for 10c when it's finally invented? There is absolutely no way they could get the funding from investors if they could not recoup the costs.. and the end result is that no cure would be found.

But again what may seem immoral in the world of life saving drugs, does not apply in consumer technology..

Chuck Stone wrote: »

I agree that people should be rewarded for innovation. I just think alternatives to state enforced monopolies should be explored.

Agreed.. But I don't believe any of the recent proposals come close.

Chuck Stone wrote: »

Also it's the small guy who's getting wallet raped by these monopolies.

You know there's one multi-million dollar industry where there is no copyright or patent protection?

The fashion industry. You might have $3000 dress on show on the catwalk and within a few weeks a fairly similar version will turn up on the high street for a fraction of the cost and the state doesn't get involved.

Still very profitable business though so there are examples out there.

I'm not sure you can patent a fashion design.. not a familiar area for me though

As I said in originally, I don't think there is a right or wrong position here.. I think it depends on how people interact with the system, and what protections or limitations they view the system places on them. I for one like the fact that designs can be protected, but equally understand why the lack of availability of certain designs (i.e. life saving drugs) can have a negative impact. Sadly, I haven't seen a system that provides infallible support for all interactions with the system from all viewpoints (nor do i think one exists.. but maybe a better inventor can pick that up )

Chuck Stone

Welease wrote: »

I'm not sure you can patent a fashion design.. not a familiar area for me though

Nor I. I heard it in a lecture from the Mises Institute (online).

Capt'n Midnight

Welease wrote: »

Is it immoral that I want to protect my design from a multinational that can easily mass produce for 10% of my cost in China and put me out of business?

under the scheme you would get 10% of the retail price of every copy sold provided you held all the relevant patents.

Considering the markup by wholesalers and distributors and retailers that could easily be greater than your existing profit margin.

imitation copies would be a copyright issue so no change there

Welease

Capt'n Midnight wrote: »

under the scheme you would get 10% of the retail price of every copy sold provided you held all the relevant patents.

Considering the markup by wholesalers and distributors and retailers that could easily be greater than your existing profit margin.

imitation copies would be a copyright issue so no change there

It could also be considerably less if they decided to play economic terrorism with you.. i.e. Sell at a break even/loss leader price to make sure you don't recoup your R&D costs.

opinion guy

I'm amazed that you all think copying the latest wonder drug would be so easy.

A big part of the R&D of these things is about taking a sample cooked up in a cutting edge lab and transferring that to a large scale manufacturing plant.

Its not as simple as Glaxo release a drug and you just copy it.
First you gotta identify the compounds within - potentially not as easy as it sounds. You also gotta be sure what part of the compound is the active moiety, which parts are important as carrier molecules and which parts can you f**k with without a) inactivating the drug or b) killing anyone. Once you've done all that and assuming you haven't changed the chemistry you have to invent your own mass manufacturing process and all thats entailed with that. If you have changed any chemistry you would have to go through clinical trials all over (and perhaps even if you havne't changed anything - they still may need to do this)
Its not a simple copy and paste - its a much bigger deal than that.

According to chucks figures 90% of the cost of making the drug in the first place (I don't know if this is true or not - but its certainly credible to me)

seamus

I have no specific issue with the ten year monopoly. Companies need to recoup the R &D costs.

I would prefer a "use it or lose it" rule though. That is, you have two years to bring a working implementation of your patent to a marketable place and another 1 to release it for sale.

Fail to do this and you lose your control over the patent.

starbelgrade

Capt'n Midnight wrote: »

The collecting agency and perhaps governments would take a slice of this new income stream.

Any thoughts ?

Too late - I've already patented this idea.