Taxpayer Patent Extortion

by on September 17, 2008 · 37 comments

Wow. Mike Masnick writes about NASA’s plan to auction off some of its patent portfolio to the private sector. When I read this I had to do a double-take: NASA has a patent portfolio?

This is absurd. The purpose of patent law is to promote the progress of the useful arts by giving inventors an incentive to invent. NASA engineers already have an incentive to invent: they’re being paid taxpayer dollars to do so. Accordingly granting patents to NASA is a pure dead-weight loss to the economy. It restricts the free flow of ideas with no offsetting benefit from improved incentives. Indeed, this is precisely why the copyrights on government-created works are immediately placed in the public domain.

Why isn’t there a similar doctrine in place for patent law? I can’t see any reason government agencies should be allowed to apply for patents in the first place, but if they are going to do so, they should be placed in the public domain the same way copyrights are. How can it be legal for a government agency to use taxpayer money to perform research and then obtain patents that effectively prohibit most taxpayers from using the results of that research? If I helped pay for research, I should be free to use the results.

  • http://www.techliberation.com Adam Thierer

    I see your point, but to be consistent, would you apply the same principle to a doctor or scientist seeking to patent a new drug or invention that was created during her time spent in a campus lab at a university that received significant federal or state funds? After all, that's taxpayer-supported science, but it is also science that may also hinge on the existence of patent protection.

    Of course, this gets into all those Bayh-Dole Act issues. I haven't looked into this stuff in years, but it does raise some interesting questions. I'm not sure how I feel about it.

  • http://techliberation.com/author/berinszoka/ Berin Szoka

    I don't disagree, Tim, and I'm usually among the first to beat up on NASA, but two questions:
    - If government agencies were required to file for patents–and then release the patent into the public domain–might that not serve some useful function? I'm no patent expert, but I thought that the patent system served a value function as an invention database apart from its separate function of blocking others from using an invention once patented. That is, NASA might be able to help disperse an idea by patenting it–which requires disclosing the nitty-gritty details of the patent.
    - You (and the commenters on Masnick's blog) seem to make two separate arguments: (1) government patents restrict innovation and (2) taxpayer money shouldn't be used to patent something so that the government shouldn't be able to benefit by selling a patent funded by , nor a corporation by buying that patent. But of course, since the patent is being auctioned off, it's not as if the corporation buying the patent would get it for nothing. Presumably, the auction would be bid up to the Fair Market Value of the patent, so this isn't just a corporate give-away. What's more troubling to me is the idea that the government agency could essentially supplement its Congressional appropriation with patent auction revenue. Of course, in the context of spectrum auctions, that revenue goes straight to the General Treasury, not to government agencies (except where it's government spectrum that's being auctioned off, in which case the agency may recover the costs of spectrum relocation). So if the revenue went to the general treasury and stayed there, the patent auction revenue would simply help to bloat the Federal government. The issue might be different if we had a system by which total Federal taxes were lowered each year by an amount equivalent to Federal revenue from things like auctions, but since that seems highly unlikely to happen, I'd agree that it would probably make more sense for government agencies to simply release ideas into the public domain–though, per point 1, I could imagine some benefit in having the government agency patent the idea before releasing it.

    Again, this is outside my wheelhouse. Am I off base here?

  • http://www.tc.umn.edu/~leex1008 Tim Lee

    Adam: Yes. To put the question differently: if a researcher creates a new technology at the expense of me and other taxpayers, should he then be entitled to a legal monopoly that prevents us from using that same technology? I think any technologies developed at taxpayer expense should be placed in the public domain.

    Now, there are obvious definitional questions, i.e. what happens if someone does some preliminary work at taxpayer expense, then leaves and commercializes it later. I don't think that having done some preliminary work at government expense should disqualify someone from ever getting a patent. But technologies that were clearly produced at taxpayer expense should be available for the use of all taxpayers.

  • http://www.tc.umn.edu/~leex1008 Tim Lee

    As far as the research hinging on patent protection: that's not the business universities are supposed to be in. They're not commercial entities, and they're not there to make a profit. University professors shouldn't be using potential patent profits as a yardstick for which research to pursue, whether or not the research is government-funded, and whether or not the law allows them to have patents. If a professor wants to commercialize his research, he should take a leave of absence and start a private company.

  • http://srynas.blogspot.com/ Steve R.

    Berin, I am no patent expert either, but I think you have some of this backwards. The idea of a patent it to allow the inventor a period of time to make money off the patent while, at the same time, preventing others from using using his invention. You correctly note that NASA can disperse an idea. Where you have gone wrong is that you do NOT need to patent something in order to disperse the idea. Ideas can be easily dispersed and shared without patents or copyright. You are correct to note that the unencumbered release of information into the public domain serves a “value function”. In a sense one can say that the government has provided companies with “free” research to make their products more innovative and cheaper.

    When public funds are used to fund research, the results of that research should be in the public domain.

  • http://techliberation.com/author/berinszoka/ Berin Szoka

    Of course I understand that one need not patent an idea to disperse it. What I was getting at was that, while the main function of the patent system is to restrict the use of patented inventions, it serves a secondary purpose as a database of detailed descriptions of those ideas. I was simply making the point that, even if NASA were to “release” its inventions into the public domain, there might nonetheless be some value in having NASA include that information in the patent database as a patent. I understand researchers investigating the state of the art in an area will rely on patent filings, which are rich in detail precisely because the filers can get a temporary monopoly on the invention.

  • http://srynas.blogspot.com/ Steve R.

    I think we had a cross posting, I was editing my post while you were responding. I hope that did not present a problem.

  • http://bennett.com/blog Richard Bennett

    If our government takes out patents on inventions obtained by taxpayer-funded researchers, we would have some protection against other governments doing the same thing. The American taxpayer's investment in research would thus be protected, which is no small thing.

  • http://techliberation.com/author/berinszoka/ Berin Szoka

    I share your concern about other governments (or individuals) being able to patent something that has already been researched with US taxpayer money, Richard. But if the USG policy were such that it automatically released any taxpayer findings, wouldn't the fact that the ideas were, at that point, in the public domain effectively prevent someone else from patenting them?

    Is there some defensive value to be gained by patenting something as opposed to merely disclosing & disseminating it?

  • http://bennett.com/blog Richard Bennett

    Full public disclosure should prevent other from patenting the invention, if the system is working correctly.

    But there's a larger issue, of course, relative to the value that taxpayers create by funding research and the financial incentive to do so.

    What about creating a government-sponsored Federal Research Fund (like Fannie Mae, only better) to administer grants, file patents, and collect royalties on research? The royalties would be used to fund additional research, and seed money would come from social security taxes.

    Other counties have government-managed venture funds that do something similar, and their retirees actually get something for the payroll taxes they pay.

  • http://srynas.blogspot.com/ Steve R.

    Also see Congress Not Shutting Down Open Access To NIH-Funded Research… Yet” Mike Masnick reports that this bill is “dead”. The smoldering reality is that the concept may spark a re-ignition.

  • Adam

    As a new Fed, I asked some of my colleges about this. They thought it came down to two things, incentives for the employee (they get some of the patent royalties) and an extra revenue stream for the agency.

    Apparently it used to be the way you've described, no patents for federal agencies, but that has changed in the past 30 years, even in academics.

    While professors probably don't think about patents when starting research, I doubt they would turn down the extra funds if they discover something that is patentable, and I doubt the universities would turn it down either.

  • Anon

    i think Berin's idea has some merit. let's say you're an engineer at NASA and you design something novel. you got paid to do some work, and it's surely documented in some way, but not in a way that is easily accessible to people that don't work in your office. maybe 10 people in the whole world understand what you did, and there's no incentive to distribute the idea because there are no man-hours assigned to that task. and believe it or not, properly documenting a project just so that it's understandable to engineers outside the project can easily triple the price. this is one reason why government projects cost so much, and unfortunately, they often neglect to buy that from contractors, anymore.

    so yes, assuming you could even get all the source data on say the space shuttle, and then had a dedicated team to reverse engineer the whole thing, it would be better in the long run to encourage and pay people to write patents for posterity sake.

  • BbdHome

    Tim Lee, this is no accident. NASA purpose is to serve as a welfare system for corporations, namely aerospace corporations like boeing and lockheed martin. NASA ($18 Billion budget, taxpayers money), along with The Pentagon System ($400 Billion budget, taxpayers money) take on the cost and risk by footing the bill for all of the PURE research and delevepment, e.g. computers, aerospace, internet, containerization, automation, etc. NASA and The Pentagon is where we got these innovations, and on avarage taking up to 20 years to get to the level they are now.

    Because these technologies in their earlist concepts are very insufficient, weren't profitable for the corporations and corporate fortune 500 aren't willing to take on the risk and waste, so the taxpayer moves in and carries out it's development to sufficiency and understanding once that is accomplist then corporations move back in and you know the story from then…. Boeing sells you modified bombers to travel on ($2.5bn profit), IBM sells you the computers ($10bn profit), AOL sells you the internet, automation is used to replace taxpaying workers, etc.

    The department of health, The department of energy serve the same purpose but feed corporations like Pfizer ($10bn profit) General Electric ($21bn profit)

  • BbdHome

    Tim Lee, this is no accident. NASA purpose is to serve as a welfare system for corporations, namely aerospace corporations like boeing and lockheed martin. NASA ($18 Billion budget, taxpayers money), along with The Pentagon System ($400 Billion budget, taxpayers money) take on the cost and risk by footing the bill for all of the PURE research and delevepment, e.g. the earliest stages of computers, aerospace, internet, containerization, automation, etc. NASA and The Pentagon is where we got these innovations, and on avarage taking up to 20 years to get to the level they are now.

    Because these technologies in their earliest concepts are very insufficient, weren't profitable for the corporations and corporate fortune 500 aren't willing to take on the risk and waste, so the taxpayer has to moves in and carry out there development to sufficiency and understanding once that is accomplist then corporations move back in and you know the story from then…. Boeing sells you modified bombers to travel on ($2.5bn profit), IBM sells you the computers ($10bn profit), AOL sells you the internet, automation is used to replace taxpaying workers, etc.

    The department of health, The department of energy serve the same purpose but feed corporations like Pfizer ($20bn profit) General Electric ($21bn profit), etc.

    Going back to the pentagon and NASA (meaning taxpayer), they also serve to hand out military, space contracts to corporations after of course the taxpayer develop for new technology to sufficiency so that it is profitable.

  • BbdHome

    Hellloooo?

  • http://www.harrispatents.com Ron

    Did you not begin by stating there was an auction, i.e., an attempt to capitalize and even profit from the unused technology? If such a profit can be turned, how does the taxpayer not benefit? Just wondering.

  • BbdHome

    Ron, follow the logic. Visualize. The reason NASA (as well as the Pentagon) exist to begin with is because the fortune 500 can't foot the cost of the potential spinoffs and aren't willing to take risks and wastes, so they, the fortune 500, the corporations aren't going pay the cost and waste used to make technology efficiency in these so called “auctions” which nobody knows about, except the corporations themselves.

    That's the point of departments like NASA, it's risk free because the tax payer is paying for it. And lowers spending on corporate research and development.

    Point 2. The profit will be made from the tax paying people like yourself and will go into the pockets of the rich. Who is paying for F-22s for example?

    How many jobs did corporations like Dell send abroad for lower wages while the same tax paying workers were footing the bill for the efficiency of computers for 30 years so they could finally have commercial applications, just to increase Dells profit?

  • JC

    I think way too much is being made of this whole use of public funds thing as it relates to technology and innovation. NASA is not alone in this, and it isn't just for the benefit of big corporations. In fact, quite the opposite is true. All federal agencies (funded by US taxpayers) are required to make a portion of funds (~2%) from the prior years budgets as grants to research institutions and more importantly, small businesses. These grants which are in the billions of dollars are given out to small businesses without being paid back with the specific purpose of commercializing innovation for the public benefit. Public benefit does not mean free it means the public having access to newer and better technology deciding for itself whether the price warrants the purchase.

    Now it seems that most on here don't like the idea of the patent system, but it was intentionally developed to promote inovation for the public good. Note that for the public good does not mean free. Whether we like it or not, technology used in highly competitive areas will NOT get developed unless there is limited duration monopolies, ie patent protection. So in the example of NASA just making the patents available to the public for free, be they US citizens or not, while that sounds quite nice, the truth is that NO company will invest money and take on the risk of trying to commercialize the technology without some protection. This is the fundamental basis of our intellectual property system. This is why it was needed and frankly one of the reasons why the US is so much more innovative than other countries. Not sure I agree that NASA exists to to fund the R&D of big corporations, I do agree that federally funded research is often much more early stage than corporations, big and small, are willing to take on. This is what makes this country so great with such importance placed on basic science and innovation.

    As someone else posted, NASA or any federally funded or subsidized agency could simply publish the data which would effectively place it in the public domain. The reason they do not is that in order for the technology to be actually developed by companies is if there is actually some protection. The value of the technology has little to do with the actual novelty but rather the novelty with monopolistic protection for a limited period of time. While most patents describe the invention in fairly good detail, they are hardly developed and substantial risk and cost still lie ahead for someone to take on.

  • BbdHome

    JC, google some key words;

    Boeing NASA
    Boeing NASA welfare
    Boeing Pentagon
    NASA Research Boeing
    Raytheon Pentagon
    Lockheed NASA
    Pentagon Welfare

    They're pretty open about it, no big secret.

    http://www.comspacewatch.com/news/viewpr.html?p

  • BbdHome
  • BbdHome

    Back again, figured I'd probably return again to add anymore relevent information for anyone to read.

    http://www.meei.harvard.edu/research/hottopics/

    The information above is a short read. “Federal research and development budget will total $134.8 billion in fiscal year 2006″

    Now show me how much commercial sales and profit the federal government has made? Show me how many State owned corporation there is in the US.

  • BbdHome

    SPINOFF 2002

    http://www.sti.nasa.gov/tto/spinoff2002/glenn.html

    Many serendipitous spinoffs resulted from NASA's work in the early 1960s. The Agency realized that industry could benefit from the vast amount of research performed at the Cleveland facility (then the Lewis Research Center) and began to proactively apply its efforts to assist industry with their technical needs.

  • BbdHome
  • BbdHome

    SPINOFF 2002

    http://www.sti.nasa.gov/tto/spinoff2002/glenn.html

    Many serendipitous spinoffs resulted from NASA's work in the early 1960s. The Agency realized that industry could benefit from the vast amount of research performed at the Cleveland facility (then the Lewis Research Center) and began to proactively apply its efforts to assist industry with their technical needs.

  • BbdHome
  • BbdHome

    SPINOFF 2002

    http://www.sti.nasa.gov/tto/spinoff2002/glenn.html

    Many serendipitous spinoffs resulted from NASA's work in the early 1960s. The Agency realized that industry could benefit from the vast amount of research performed at the Cleveland facility (then the Lewis Research Center) and began to proactively apply its efforts to assist industry with their technical needs.

  • BbdHome
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