[asmithmd1]

> a lot of the value comes from the exclusivity of it

I think you are confusing value and price. Auctions precisely determine something's value. Companies sometimes can use scarcity to capture more money in price than they deliver in value - but that is a bug in our economic system, not a desired feature

[pclmulqdq]

Implied in your comment is that scarcity does not confer value, which is just not true. Scarcity, particularly when controlled by one entity, creates tremendous value for that entity because it creates a power imbalance with other entities. Otherwise, the secret coca-cola formula would have no reason to stay secret. Patents actually get their entire value from the artificial scarcity they create - you don't need a patent to confer an invention to someone else, only to stop other people from using it. Scarcity also greatly improves your ability to capture value, but it creates value to be in the club.

Another possible misunderstanding you may have about the concept of "value" is that you may be conflating value (in general) with societal value. One is a subset of the other - you can get value, companies can get value, and society can get value. People and companies can get a lot of value out of things that are not directly valuable to society, and society tolerates these things because society, on the whole, gets more value from having those people and companies in it than not. This is why you can drink, and also why most countries have patent systems despite that patent owners may not make optimal societal use of their patents during the term of their limited monopoly.

Also, if you have ever sold a patent before, you will know that it frequently takes the form of an auction process. Even if not explicitly structured as an auction, these negotiations have auction-like qualities with buyers bidding against each other and actually a lot of information-sharing.

[asmithmd1]

So you are saying price==value? That is not true. The price a company extracts from a customer is de-coupled from the value a customer receives.

If I walk into a store to buy a shirt I saw online only to discover it is on sale for 20% off, I am getting the exact same value as buying it online, but the company captured less of the value they delivered.

If there is one shirt left in the store and the store holds an auction for it that I win for a price 20% higher, again I get the exact same value, but the store captured 20% more of the value.

The goal of any sane economy should be to deliver the most value to the people in it - including the people who own companies.

[pclmulqdq]

Basic economics can tell you that "price <= value to customer" is a relationship that holds pretty damn strongly. Price isn't decoupled from value, it is derived from value. I am just saying that the actual customer (not some nebulous notion of society) derives value from the scarcity.

Like it or not, people often get value from scarce things, usually in the form of power (or status for other kinds of goods). In a system with compulsory licenses for everyone who wants them, that power is gone, and so is the value related to it.

> The goal of any sane economy should be to deliver the most value to the people in it - including the people who own companies.

Which is why every economy today has a strong patent system with monopolistic rights. It is a very good way to deliver value to inventors and small technology business owners while encouraging disclosure, and a good incentive for them, in turn, to contribute to the wider body of societal knowledge. A system with mandatory non-scarce licenses would not do this - we would end up with more "coke formulas" and fewer papers.

[asmithmd1]

Now I understand what you are saying. The only way I see individuals deriving value from scarcity is with brands - not functional patents. Even with technical luxury goods like watches and cars, which may also include patents, the real customer scarcity value comes from showing others they are rich enough to buy and flaunt those goods. Can you think of an example where something purely functional is only valuable because it is scarce? Maybe private jets? If jets dropped in price 50x, private airports would become crowded and destroy much of their benefit. But then the gating luxury good would switch to being a member of a private airport network or something.

I am talking about a change to patents, not copyright and trademarks which are exclusive essentially forever. You can still strut around with a $20k Birkin bag (If they deem you a worthy buyer of course) that delivers the same functionality as a $100 purse. No one will be allowed to make fake Birkins and destroy their exclusivity. But if Hermes patents some new zipper, you would be able to duplicate their zipper and pay them a license fee. You would NOT be allowed to mention their brand. Patents are about function, not color, size, style or ornamentation.

[pclmulqdq]

Individuals don't derive value from scarcity of inventions, which is why individuals don't buy patents.

Companies do derive value from that scarcity. Companies derive value from a lot of things that don't pass along to the customer, which is why companies engage in marketing and buy business insurance, for example. Both of these add $0 of value for the end customer, but they have value to the company. Patents are the same. You can't discount the value to the company in your economic calculation here, because the companies are the ones who are actually buying/licensing the patent!

When you think about patent-based tech transfer, there are two parts of that transfer which you can actually value separately:

1. The invention itself - a new widget or process that does something cool/useful for the customers or makes the company more efficient

2. The patent - a property right that allows the company to exclude other people from using the invention for 20 years

End customers/users only get value from #1. Regardless of whether the patent is for nuclear fusion or changing the volume on a speaker setup, they get $0 of value from #2. The same is true of trademarks and copyrights, by the way, they have $0 of value to the consumer.

Your hypothetical change in patents would work perfectly if you assume that all of the value of the patent is encapsulated in #1, and is a way to price that. It completely discounts #2. #2 is actually where most of the value in high-value patent portfolios comes from.

Your nuclear fusion hypothetical is the same: the energy companies likely get O($100 million) or less of value from the technology itself (thanks to how commodity markets work - efficiencies basically get passed on to the consumers), but tens of billions of dollars of value in terms of their ability to expand market share into markets where it is cost-effective to use and their competitors can't use it. The exclusive right to use the technology is what enables the company to capture value there.

By the way, the main enforcement mechanism today against lookalikes of those Birkin bags is a design patent (US D656,313), not a trademark. In about 3 years, that patent will expire, and you will see trademark-non-infringing similar-looking bags popping up a lot more. Under your hypothetical, someone looking to make a similar bag would just have to pay them a license fee (and of course, don't mention the brand or the word "Birkin" and make sure to change up one of the trademarked features - see trademark no. 76700120), and the lookalikes would be 100% okay.

[asmithmd1]

Thanks for sticking with me and engaging.

I agree that design patents should not have a compulsory license. Interesting that Birkins patent expires in 3 years. I will set a calendar reminder to look into knocking them off in a couple years :)

I appreciate your thoughtful disagreement with my assertion that it is possible to set a compulsory license fee that would be "value neutral" between patents as issued today, and patents with a compulsory license. I think there is something that could be done to reform patents along these lines, but it is a harder argument to make and that argument DOES start going into the "value to society" area and is therefore purely political.