The last monopoly

Discussion in 'Growing and Managing a Business' started by michaelbriskin, Nov 26, 2012.

  1. michaelbriskin

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    Nov 19, 2012
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    In the spirit of the premise below, if you read this and contribute a real idea that's good enough to implement there's a chance I'll tip you for it, assuming the concept works out.

    Patent claims by nonpracticing entities- companies that exist solely to enforce their intellectual property ownership- cost US companies $29 billion in 2011, according to a paper by two Boston University law professors -Victoria Tang
    Source: The Direct Costs from NPE Disputes, James Bessen and Michael J Meurer, Boston University School of Law
    (Wired Magazine, December 2012)

    One of the most troubling concepts plaguing free minds and free markets is that of patents and intellectual property laws. Intellectual property seems to be the only government sponsored monopoly that almost everyone seems to agree is a good idea. In fact, the only people these laws don’t benefit are consumers, innovators, and people whose jobs depend on businesses, or at least any business that doesn’t have every patent. In other words, everyone.
    A possible alternative to the current system that encourages price-gouging and stifles innovation might be described as a three-part process:
    1) private pitch
    2) free exchange of information, (including promise of reward) and
    3) release of information (reward) as well as the product/service proposed

    To elaborate, the private pitch involves pitching one firm, or a few firms discretely. Free exchange of information involves the promise of reward, or negotiation; a gratuity for the innovator that can be arranged any number of ways. The final step, release, involves detailing the nature of the reward upon the product, service, or improvement’s release into the marketplace so future innovators can assess the generosity of the company that was provided the idea or innovation, and decide whether that company is worth pitching in the future. Similarly, companies that plan to reward highly can demand a limit on the number of companies that can be pitched initially, or demand to be exclusively pitched. (accompanied by a pledged time within which they will respond, should they choose to implement the idea)
    In other words, this is a concept of rewarding innovation in a free market, powered only by the concept of company reputation, and the first mover advantage. Companies that reward highly will become breeding grounds for innovative concepts.

    “We also find that individuals from outside the firm, preferably outside of the industry, often lend the most original ideas.”
    Bringing Science To The Art Of Strategy, A.G. Lafley, Roger L. Martin, Jan W. Rivkin, Nicolaj Siggelkow
    (Harvard Business Review, September 2012)

    To avoid answering unnecessary questions, and projecting too far ahead, I’ll remind readers that according to game theory, every player has an optimal course of action, given the optimal course of action of all other players, and it may take several “rounds” to discover what those are. Innovators choose who and how they pitch, companies choose their own promised response times, requirements, methods of reward, etc. That said, I appreciate any questions I receive, because they help me articulate the concept, as well as understand what must be clarified in order to promote it.

    [Anticipating the answers to some questions ahead of time yields interesting results. One example might be “What if a company overlooks an idea, then sees it implemented successfully, and implements it without rewarding the innovator?” To be clear, a company that doesn't implement an idea doesn't have a head start (“first mover advantage”) over all the companies that see it upon release, which makes the question irrelevant. That said, questions like these sometimes present serendipitous intricacies. For example, the company in question will already be listed as having been pitched. In terms of competition to maintain preferred status among innovators, such a company might even do well to retroactively tip the innovator to maintain its reputation despite overlooking a good idea. This is not necessary, but is just one of the many examples of how truly free markets might incentivize above-and-beyond mutually beneficial behavior, and is actually a very possible course of action for a company that values its reputation as a front-runner enough to have been an early company pitched in the first place. (Such a strategy might prove to be a way for the second or third priority company to gain popular preference over the first; innovators will gravitate toward companies that reward them for being giving them early choice even if they didn't initially recognize the value of the idea.)]

    The real world:
    The United States is set to switch the patent system from "first to invent" to "first to file" in 2013. It will be the last developed country to do so. That means this idea will have to start with a cost-effective way to file all contributions (Having sent this idea to a relative who is also a public relations consultant, I learned this has been done by a web service called, a marketing firm for inventors, so it is feasible) and encourage the price and innovative competition this concept enables by "waiving" those patents for member firms, which is legally akin to getting the patent holder to "sell for free" the ideas that they patent through the site, even though such an act is done with the expectation of a gratuity. Interestingly, this will attract firms to the site, because they receive the rights to this idea after step three, which they wouldn’t have received otherwise, preventing the first mover from price gouging in addition to receiving a head start, as the barrier of discretion only exists until the release of the product or service. Also conceivable is the innovator simply agreeing not to pursue litigation toward any firm, which seems terrifying at the outset, until one realizes that such a fear has its roots in a system where the conclusions of most deals were poorly publicized, inventors were almost never recognized, and rarely received much. By contrast, delayed transparency is key to making this concept work.

    This concept was designed as a free market response to the idea of intellectual property. It works beautifully in a vacuum. Working side-by-side with the current system is tricky, but every country had a postal service before there was email.

    I’m playing with the idea of demanding a minimum royalty/reward for the innovator from all member firms that implement a proposed product or service as a condition of being involved on the site, regardless of having received the first mover advantage.
    From a legal standpoint, can I get the innovator to agree not to litigate a patent? This works just as well as a minimum royalty in terms of discouraging free-loading patent dodgers from clogging up the portal, as there’s no advantage for them over non-members. I’d prefer the site cater to companies who can legitimately capitalize on first mover advantage. I could also start by exempting inner firms from patent litigation to attract firms at the outset until the concept proves itself, then graduating to getting innovators to agree not to punish any firms with patent litigation so companies that join are only those that genuinely seek to receive innovations ahead of time. Similarly, firms will likely not be charged to join at the outset.

    Hopefully, this concept can serve as an alternative approach in a world rife with innovation stifling and consumer-robbing.

    All feedback is appreciated, although legal advice, as well as how to make the site a both a free service as well as a paid service (free, with advantages for paid members- could be done just by indicating/highlighting, keeping certain pitches at the top of the list, alerting innovators when pitches are viewed, etc. [I was made aware of the term "freemium" by a post by Fergal in an earlier thread]) would be appreciated above all.

    Obviously, not all suggestions will be used, but I’d recommend signing your full name to your post, so I can recognize contributors in the future.

  2. Justinjude

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    Oct 18, 2012
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    This discussion is totally legal in nature as such specific suggestions cannot be given. Although, I would support the view for the royalty.
  3. Paul78

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    Apr 4, 2013
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    I also support the view of the royalty and think that in this sense the US system works out very well, especially because it has many initiatives to keep the economy competitive and, thus, on the edge of innovation. I view it as one of the reasons why the US has fared better than my home country in terms of overall economic opportunities and innovation, which overall leads to a better living standard. This is also why I applied for the greencard lottery, click here to know more and actually won one of these cards which gives me unlimited work rights and residency in the US. Soon I am going to move to Texas soon, which will be quite exciting, not only for the great working opportunities that it provides in my field.
    #3 Paul78, May 23, 2013
    Last edited: May 23, 2013

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