On Patents

Patents drive me crazy.

While on the one hand, they protect the intellectual property of a company or individual, on the other hand, they are completely ruining the technology industry. Instead of spending time innovating, and building systems for the betterment of our society, companies are embroiled in litigation with each other over incredibly vague and abstract patent concepts, and are thereby blocking a lot of incredible opportunities for innovation.

I think the patent system needs to be reinvented. Here’s how I think it should work:

  • The first person or company to submit a valid patent (the current rules on this are okay*) on intellectual property should be awarded the patent.
  • *However, patents should not be awarded purely on design unless the design is critical to the functionality (such as a particular shape that allows a function to work). In essence, technology patents should be on function, not form.
  • The patent should immediately apply for 3 years if it’s related to a physical product or hardware (a tangible item).
  • The patent should immediately apply for 2 years if it’s a business concept or software product. Basically, if it’s an intangible or semi-tangible idea.
Now, here’s where it needs to be very clear:
  • If the intellectual property (IP) is usable and complete (ie, a fully drafted model for intangibles, or a working prototype for tangibles), then the patent should extend for a base period of, say, 50 years.
  • However, if during that time the IP fails to procure revenue, fails to make it to market, or fails to become publicly available in any manner, the patent should only apply for a maximum of 10 years.
  • If it’s a tangible patent (product or hardware) but the IP owner has not yet built a prototype or physical product, the patent should apply for only 3 years.
  • If it’s an intangible patent (concept, model or software), and the patent owner has not yet produced a working model or usable product from it, the patent should apply for 2 years.

In effect, on those latter two, if you secure a patent, but fail to produce anything under that patent, the patent should be revoked after 3 years for tangible items, 2 years for intangible. However, there should then be a grace period after that, to be fair for things like economic conditions that make the 2-3 year period reasonable:

  • The patent should remain vague on public records (a description without full IP details) for a maximum of 2 years after being awarded the patent, to give the patent holder a reasonable time to secure a working prototype, if applicable.
  • For a functional patent (one that applied for 50 years), the patent can simply be renewed, but the above conditions must still be met.
  • For a functional patent that failed to produce revenue, or for a tangible or intangible patent that never reached a completed state, at the end of the patent period, the patent should be automatically made available for sale, with a price set at 150% of the cost of registering the patent. The patent owner may optionally “repurchase” their own patent.
  • Any buyer (including the original owner) now has half the time available to fulfill all of the above (except for the 50-year patent, provided the rules are still being met).
  • The process can repeat until a patent has a 30-day life or less, at which time it becomes void.
And then one additional magic rule:
  • If you fail to allow your patent to be licensed to any other companies, all of the above times are immediately cut in half at the time you are awarded the patent; whether you are awarded the patent by merely having it approved, or if it’s by purchasing it.
And one exception:
  • If you are awarded a patent and are then able to license the patent to another company (without producing a tangible product yourself), that company must meet the above conditions (ie, creating a working prototype) in the same timeframe as though they owned the patent themselves. But if the license ends, or if the product doesn’t meet the above criteria, the same timeframes still apply. This prevents someone from securing a license, but then simply never producing anything from it. They would still need to meet the criteria as though they themselves owned the patent.

Basically, this would completely eliminate patent trolls, and would prevent any company from securing a patent and then simply blocking anyone else from implementing it while the owning company or individual simply sits on it waiting to collect money. To ensure that happens, a company would be perfectly free to develop a product that is a complete rip-off of a patent, and then simply wait out the patent’s life and either purchase the patent, or wait until it expires and then produce a working product with no licensing requirements. This gives the owning company or individual time to make their patent usable (hence the brief period where the patent is not publicly available) in order to secure the 50 year patent, or effectively give up their rights to the patent. Meanwhile, another company may steal the idea and owe you no royalties, but really, if you can’t produce a usable product from your patent, you don’t deserve to own it. With the licensing requirement as an option, this ensures that companies who are genuinely interested in the patent will be motivated to license it, rather than risk waiting for it to become void, knowing that a competitor could simply scoop up the patent.

In effect, if you invent a concept for, say, software, but it never sees the light of day, your patent goes up for sale in 2 years. If it fails to sell within 1 year, it becomes void. If it sells, the buying company then has to the end of that 1 year period to produce something usable. If they fail to, the next buying company has 6 months. Then 3 months, then 1.5 months, and then the patent is void. Thus, a software patent that never comes to fruition is void in just shy of four years. With hardware, just shy of six.

Goodbye patent trolls. Goodbye ridiculous litigation over intellectual property. Hello fair competition and innovation.

What do you think?

Understanding Statistics

This isn’t specifically a Mac or Apple post, but rather a focus on the statistics and results of this particular survey. The survey identifies that about two-thirds of PC users (64%) would pay less than $600 for a Mac Tablet, and the remaining one-third would pay $600 or more. Interestingly, of the remaining 36%, 20% would pay more than $800, while only 16% would price it between $600 and $800.

In contrast, current Mac users have a different view: 27% would pay between 600 and 800, 41% would pay more than $800, and only 32% would pay less than $600.

Let’s look at these numbers a little deeper though. A Mac user is twice as willing as a PC user to pay $800 or more, and almost twice as willing to pay $600-800. They are half as willing to pay less than $600. In other words, Mac users consider the price worth it, and are twice as likely to buy a Mac Tablet as a PC user, regardless of the price. In other words, Mac users value something other than price when they make a purchase. PC users, on the other hand, value price above all else.

Basic economics says that a person will never pay more for a product than the value that product provides, except in the case of a pure monopoly on a necessity item. Thus, when a person is willing to pay a certain price for a product, they consider its value to be relative… they will pay more for a product they feel is worth more, but will not pay more than they think it’s worth. Make sense?

In this survey, 64% of PC users will not pay more than $600. Economically speaking, it’s because they don’t consider the value of what they are purchasing to be greater than $600. But their primary frame of reference is the cost of PCs, and in particular, $300 to $600 netbooks. In contrast, 68% of Mac users will pay more than $600 for a Mac Tablet. Again, economically, Mac users value a potential Mac Tablet as greater than $600. Now also consider that both parties are people who are willing to buy a Mac, and therefore already place some degree of value on it. These are not people who were asked what they think the product will be priced at, these are existing computer users who were asked to identify what price they would be willing to pay. PC users place a lower value on a Mac than Mac users do.

Thereby begging the rhetorical question of the day: Who is better to judge the actual value of a product–the person who already uses it, or the person who doesn’t use it?

In effect, PC users are saying, “I want a Mac Tablet, but Mac’s are pricey, so I want them for the same price as netbook PCs, because I value them as one and the same.” Mac users are saying “We already use a Mac, and we already know its value, which we consider to be greater than the value of a PC, so we’re willing to pay a higher price for that greater value.”

And this is where statistics get funny. The article from TUAW suggests that Apple needs to keep the price of a Mac Tablet at about $600 or less to attract PC users. Yet, Mac users are willing to pay more. But from Apple’s perspective, the statistics say something different:

Don’t take losses by selling the product cheap just to win some short term converts: current Mac customers don’t care. And current customers are more valuable than potential future customers.

Remember the old adage, slow and steady wins the race. Focus the time on educating the PC user to become a dedicated Mac convert. It’s not like Apple to win a convert by offering a cheap product. They win a convert by gradually appealing to something other than people’s pocketbooks.

Because Mac users get it.

Mac users understand the value and are willing to pay more for it. And once the product is out there and tested in a controlled capacity, then work on making it better, and dropping the price. You win more converts each time, and existing Mac users buy a new one anyway.

And lastly, don’t forget that we’re talking about a product that doesn’t even exist yet, and already people are willing to pay a premium for it. That’s precisely what Apple needs: Mac users and PC users alike acting like Pavlov’s dog over a potential product. It’s not a bad thing. But it is a learned, and conditioned response, and Apple knows how to lead that well. It will be interesting to see how this knowledge will drive the development of this product over the next two months.