Let’s say that someone has genuinely created something new–and we’ll skip the fact that most drug research actually uses massive government subsidies. Let’s say we want them to make money for doing so, in order to encourage people to keep innovating.
Again, there’s a simple fix: Mandatory licensing.
If a company has beneficial control over the patent or copyright:
For X years (I’d suggest seven), anyone who wants to use their patent or copyright must pay them 100 percent of the manufacturing cost of making the product.*
After that, anyone who wants to make their product must pay 10 percent.
You can fiddle with the numbers and years, and yes, patents are usually only small parts of final products and there are details around that which need to be fixed, but the principle of mandatory licensing is what matters.
Now, notice I said “the company has beneficial control.”
If an individual has beneficial control
(meaning most of the profits are actually going to them, not to a corporation), I’d extend the period by two or three times, to encourage individual innovators and to try and keep all IP from winding up in the hands of corporations. Also, an individual often needs more time to fully exploit a new invention or copyright item.
The justification for patents and copyrighting is that they make people more likely both to invent something and to share the details. One of the great problems they try to solve is people inventing something then keeping it a secret how that something is created.
In this age of reverse engineering (assuming we allow reverse engineering to be legal), the second part is less important, though not insignificant. But the larger point is this: We want innovators to be paid, and we want to incentivize them to share. 100 percent monopoly profits for X years is a lot of money, but it avoids the “jack it up by thousands of percents” problem.
It also makes markets actually work how they’re supposed to. In economic theory, competitive markets are supposed to drive costs and profits down because if anyone has high profits, someone else will enter the market. Strict monopoly intellectual rights make it impossible for markets to work the way they are supposed to.
(*When one looks at EpiPen, today, it is not a case of patents, it is a case that FDA trials would cost 1.5 billion. Competitors should simply be able to copy the EpiPen design and forgo trials beyond confirmation that they have.)
(*This number would have to be different in industries like software and pharma where unit manufacturing costs are often close to zero. The principle is simple: you make back your investment and get a good profit, but your invention/idea is available for all to use at a reasonable price as soon as possible, so society benefits fully and you don’t price gouge.)
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Stirling Newberry
How will we have yachts?
S Brennan
Having been through the patent process 3 times as an individual and seven times as a corporate drone my thoughts some which dovetails.
There should be at least 4 levels of patents and copywrite’s:
1] Individual, an absolute minimum of filing fees [no more that 15 times minimum wage] and no maintenance fees with a max $1,000,000.00 buy out. That means any company can buy it for a maximum fee of $1,000,000.00 which declines by 50,000,000.00/year…worthless in 20 years. The inventor has the duty to pursue a working model and market introduction within their means, the patent is considered abandoned should the idea not be rendered to practice withing 10 years.
2] Small company, normal filing fess and maintenance fees, with a max buyout of 2.5 million which declines by 125,000,000.00/year…worthless in 20 years. The company has the duty to pursue a working model and market introduction within their means, the patent is considered abandoned should the idea not be rendered to practice within 5 years.
3] Corporation, any size, high filing fees and very high maintenance fees, with a max buyout of 30 million which declines by $1,500,000,000.00/year. The company has the duty to pursue a working model and market introduction, the patent is considered abandoned should the idea not be rendered to practice/market within 3 years.
4] Corporate X, extremely high filing fees and extremely high maintenance fees with a max buyout of 100 million which declines by $50,000,000.00/year. The company has the absolute duty to pursue a working model and market introduction, the patent is considered abandoned should the idea not be rendered to practice withing 3 years.
If one buys a junior patent, it is brought to the level of the buyer. The written word nor performing art are to no longer to be seen as superior in rights to medicine, science and engineering. I find it odd that a person could invent a practical fusion engine and have only twenty years to profit and yet a drunken scribe scribbles a modern day version of an old fable and is granted 90 years rights to his work…and by extension, to the old fable.
Riverdaughter
Ok, you lost me in the first paragraph. Let me disabuse you of the massive government subsidy urban legend of drug research thingy.
I’ve worked in both pharma R&D and academic R&D. So I know of what I speak.
Before big pharma decided to delete all their researchers in the wake of the patent cliff, it was big pharma that spent the bulk of the research money on research. And let us be clear about this, it was REAL research with real experiments and studies. I was there.
Sometimes, we started out looking at a research paper from an academic source for new projects. Sometimes, we used our own genomic and proteomics studies. Sometimes we read papers from other companies. In other words, basic research comes from a variety of sources.
In early research, we spend a lot of time validating other research. Most of the time, academic research is just a tidbit of a soupçon of a hint of something interesting that deserves further attention. I have seen millions of dollars and years of industrial research pursuing these morsels all come to nothing because there were a lot of things the academic researchers didn’t know about the molecular biology and systems biology involved, or the “drug” they started with had millimolar activity, which makes it not very drug like or bioavailable. Then it was the industrial researchers’ jobs to do the bulk of the REAL BASIC RESEARCH to see if a receptor site could be explored to find a lead compound for a drug.
That’s REAL research that I did in industry for 23 years as a drug designer. I’ve never been on a project where an academic lab funded by government money delivered a fully formed drug that only needed formulation and packaging by Big Pharma. There are very few instances of this happening. They are extremely rare. The one I am most familiar with was a cancer drug co-discovered by Princeton University. They got a new chemistry building out of that and more power to them. But if I recall correctly, it wasn’t just delivered to big pharma without any additional work.
As for academia, I’ve worked for two such labs. The grant money is stingy and very difficult to get. The principal investigators spend most of their time applying for grants. It’s a very political process and a lot of promising research doesn’t get funded. Guess where they get a lot of their funding? If you said big pharma, you would be right. And this is not because academia is so fantastically good at producing new drugs. To the contrary. I’ve just told you they weren’t. Plus most grad students and post docs are still in learning mode. In my experience, it takes a good 10 years in a R&D setting after the PhD to really get the experience and knack for research.
But this is what the big pharma MBAs want. They have themselves convinced that the researchers they got rid of can be replaced by inexperienced overworked grad students. Shareholder value and all that.
It serves no one well. Not academia, industrial researchers or the public.
What’s the best environment for research? IMHO, it’s a midsize corporate lab where research facilities and areas are shared and foster collaboration, where industry is incentivized to focus on the long view and where academic labs are fairly compensated for their intellectual property. I’d overhaul the grant process and increase the NIH budget enormously. Last but not least, I’d force pharma to return to more reasonable profit margins of the 90’s and overhaul and modernize the FDA. And we haven’t even talked about the out of control class action law industry.
This problem is multi-faceted. It’s not enough to throw assholes like Martin shkreli in jail. And I really wish bloggers wouldn’t state with certainty stuff they don’t understand. Big pharma does real research. I was there, I did it and I know the limits of academic research.
TW Andrews
Software should also not be patentable. Source code is already subject to copyright, which is appropriate. Patents are unnecessary.
Hugh
The R&D budget for the NIH in 2016 was something like $29.6 billion. How many billion does BigPharma spend a year on research?
The EpiPen is more a medical device based on well-understood principles so I am not sure a similar device would need full-blown medical trials.
I favor the creation of government drug production facilities whose purpose would be to produce high quality, low cost generics, vaccines, simple delivery devices like the Epipen, as well as more expensive orphan drugs, essentially addressing the needs not addressed or grossly exploited by BigPharma.
There are two other important drug-related issues: copycats and reformulations. Copycat drugs are ones where a molecule is slightly altered, say by the addition of a few methyl groups, to produce a similar but not identical compound. This is how we end up with multiple statins, SSRIs, and cephalosporins, for example. Reformulations take the same drug and change it from say three times a day to once a day. The reformulated drug is given a new name and is treated as a “new” drug.
bruce wilder
“markets” is b.s.
Your economic analysis would improve if you discarded the convention of talking as if the economy was organized around competitive markets, and talked more accurately and concretely about the actual administrative and bureaucratic processes that organize and govern the economy.
Lisa
What and stop the steady movement to a pre Adam Smith (who is spinning in his grave) ‘rentier’ economy? Tsk, tsk, tsk how ‘socialist’.. actually how ‘capitalist’.
The neo-liberal economic ideology is fundamentally inimicable to capitalism. In fact a better name is neo-feudalism, with rentiers owning all the capital stock extracting rents all the time, with the full backing of Govt force to ensure that.
Carla
@ S Brennan — You really gotta work on your zeroes… for example: ” That means any company can buy it for a maximum fee of $1,000,000.00 which declines by 50,000,000.00/year…worthless in 20 years.”
No, a fee of $1 million which declines by $50 million a year would be worthless in a little over a week.
RickM
“Big pharma did real research. I was there, I did it and I know the limits of academic research.”
There, I fixed it for you. I’ve been involved, too. Academics, start-ups, and corporate. A real source of our current distress is the Bayh-Dole Act of 1980. Previous to that newly minted biomedical PhDs chose an academic path or a corporate path. Both practitioners thrived, with the scientists at Ciba-Geigy, Hoffman-LaRoche, and Merck making more money, while their academic counterparts had more ostensible freedom. Both looked down their collective noses at each other, but without much rancor. After Bayh-Dole many academic scientists figured to start something and cash out, by selling out to Big Pharma. Most failed, some got rich, a few more got filthy rich. But academic science suffered. And Big Pharma became more adept at marketing than anything else as the “market” forced (sic) merger after merger. Now, most of their advances seem to come by purchase rather than work. Unless and until the NIH budget recovers to its “historical” funding level that means 0ne-third of applications get funded, one-third will get funded, and one-third will remain hopeless, instead of a near-random 10% get funded while 90% remain hopeless, we are leaving way too much undone, with unknowable consequences. But they are dire. As for Big Pharma and the fundamental research that forms the foundation of effective pharmaceuticals, it has been a very long time since any of that was done in house. Besides, Imatinib is perhaps the index case for development of a cancer drug in house, but without 50 years of academic research on protein phosphorylation, made freely available to all comers (with a library), that work would have been unimaginable. Nor would there have been anyone qualified to do it. Arguing about the relative merits of academic and industrial research is akin to arguing about which leg is most important in a 3-legged stool.
nihil obstet
Let’s just end so-called intellectual property. The costs of maintaining and enforcing the role of every molecule in every medicine and every chord sequence in every song (yes, Led Zeppelin, you did steal “Stairway to Heaven”), every theft in every parody, every part of every research project just simply outweigh the advantages. It does not promote innovation if the innovator has to have an expensive legal team to proceed. The schemes so far to maintain the intellectual property system sound rather like the “IP Lawyers’ Income Guarantee.” Every complexity demands more complexity and offers more opportunity for gaming the system.
And this is before we even consider the consistent finding of years of research that external incentives are counterproductive in all but the simplest tasks. Remember the early days of the internet? Or today, even. Lots and lots of good things get done without the external incentive. The problem is the survival of the people doing them, not their extraordinary enrichment.
Obviously, we need a way to support creators. Dean Baker over at CEPR has been working on proposals to do so for years. I’m rather fond of a guaranteed income to free up people, although for research/inventions that require expensive equipment, we’d need additional ways to provide resources.
Why spend our time trying to recreate scarcity for the sake of an economic system built on scarcity when we should be trying to create the means for a prosperous world?
EmilianoZ
The ultimate logical consequence of for profit “healthcare” is that you should be bankrupted if you need your life to be saved. How much would you pay to save your life?
Tom
FSA and Turkey have now begun a full out offensive against the SDF Terrorists towards Manbij and Turkish Forces have entered Kobani City and are swiftly seizing control of it.
Another Prong of the joint Turkish/FSA advance is moving towards the Azaz Pocket to link at al-Rai.
In addition Turkish Forces are massing on Afrin Canton as well.
Looks like the SDF are pretty much fucked, Obama isn’t going to save them, not when they are no longer useful to him.
highrpm
@ez
zero.
Jon Garman (real)
Back in the 60s I worked for a Silicon Valley giant. When I joined they had me sign an agreement to assign all patent rights to patents I filed to the company. After I signed the first one, I asked “where is the dollar”?. I was told “The paycheck you received last month… it was in there some where.”
My point here is that the original constitutional incentive to inventors to disclose technology publicly in return for personal exclusivity has been subsumed by the ability of employers to demand release of their inventor right as a condition of employment.