The U.S. Patent System Must Change In The Bitcoin Priced Deflationary Future

The Price of Yesterday’s Innovation: Applying Insights From Jeff Booth’s “The Price of Tomorrow” To The U.S. Patent System

*Special acknowledgment to Jeff Booth for discussing these ideas with the author.

In his 2020 book, “The Price of Tomorrow: Why Deflation Is the Key to an Abundant Future,” Jeff Booth describes 2 opposing forces astatine the halfway of our economy: fiat monetary debasement (i.e., wealth printing) and technological advancement. Monetary debasement is inflationary, arsenic prices emergence erstwhile much dollars, euros, etc., pursuit aft the aforesaid fig of goods and services. Technological advancement, by contrast, is deflationary, arsenic implicit clip technological breakthroughs let for goods and services to beryllium produced and distributed astatine higher measurement and little cost. The effects of these opposing forces connected terms levels somewhat cancel each different out; an accrued proviso of currency is matched to immoderate grade with an accrued proviso of goods and services available. Of course, antithetic classes of goods and services are impacted by technological innovation to antithetic degrees, which results successful uneven ostentation rates crossed industries. The complaint of innovation successful the user electronics industry, for example, is faster than the complaint of monetary debasement, resulting successful the nett simplification successful electronics prices we person each travel to enjoy. Technological advancement has had acold little interaction connected lodging and higher education, however, which tin astatine slightest partially explicate the accelerated ostentation successful those sectors. As Booth explains, some monetary debasement and technological advancement are exponential successful nature. The complaint astatine which governments are printing currency and the complaint of technological innovation are expanding each year.

Booth persuasively argued that monetary debasement has deleterious effects connected society, whereas innovation-driven deflation has the affirmative effects of, for example, mitigating wealthiness inequality and poverty. In essence, monetary debasement serves arsenic a hidden regressive taxation connected the population, redistributing the wealthiness generated by productivity gains to the authorities via seigniorage and to affluent plus holders via plus inflation. If this monetary debasement were curtailed, Booth argues, the full colonisation would bask the benefits of technological advancement successful the signifier of plummeting prices connected goods and services. If you person not yet work Booth’s book, you should.

This nonfiction expands connected Booth’s enactment by considering the interaction of monetary debasement and technological innovation connected the economics of the U.S. patent system. The modern patent model was established successful 1952. Much has changed successful the past 70 years, some successful presumption of U.S. monetary argumentation and the authorities of technology. The United States of 1952 was inactive connected a golden standard, preventing the authorities from debasing the currency arsenic it is doing rampantly today. The complaint of technological alteration was besides overmuch slower successful 1952 than it is now, arsenic the state was conscionable opening to participate the machine property and globalization was a acold ways off. In presumption of these monolithic changes successful our system which are continuing to unfold, it is the author’s sentiment that the U.S. patent strategy is becoming progressively incapable to service its intent of promoting innovation and economical growth. A instrumentality to dependable wealth (i.e., ending monetary debasement by adopting a bitcoin standard) would resoluteness astatine slightest immoderate of the issues plaguing the existent patent system. Alternatively oregon additionally, reforming the patent laws could bring them into person alignment with the exponential system we present unrecorded in.

I. Brief Overview Of U.S. Patent Law And Policy Considerations¹

A patent is simply a ineligible close granted by the national authorities to the creator of a caller and utile invention. It allows the inventor to forestall others from practicing — that is, making, using, selling, importing oregon offering for merchantability — the invention during a defined play of clip pursuing the patent’s grant. Every patent is published, providing the nationalist not lone with announcement of the inventor’s exclusionary rights, but besides with a statement of what the invention is and however to marque and usage it.

The intent of the patent strategy is twofold. First, it provides innovators with an inducement to expend resources connected research, improvement and selling that could different beryllium unprofitable. Without the exclusionary rights provided by a patent, copiers would rapidly reverse technologist innovators’ products to make competing products with the aforesaid inventive features. By skipping the resource-intensive process of processing the invention, and riding connected the coattails of the innovators’ aboriginal efforts to present consumers to the technology, copiers would often beryllium capable to connection the invention astatine a little terms than the innovator and instrumentality important marketplace share. Patents forestall this script by providing innovators with an exclusive close to usage an invention during a patent’s term. Any copier during this clip is liable to beryllium sued for patent infringement.

The 2nd intent of the patent strategy is to incentivize nationalist disclosure of caller innovations alternatively than secrecy. In galore instances, an invention cannot readily beryllium reverse engineered by competitors, and truthful the above-described interest regarding copycats is not applicable. For example, an inventive process of manufacturing a merchandise mightiness not beryllium discernible by examining the merchandise itself. Inventors of specified innovations person the enactment of maintaining their competitory vantage simply by keeping their exertion concealed (what is known arsenic a “trade secret”), but this is viewed arsenic little socially desirable than patenting due to the fact that the nationalist is not apprised of the latest technological developments. The patent strategy incentivizes creators of adjacent inventions that cannot beryllium reverse engineered to disclose their inventions, facilitating further incremental improvements connected the exertion by others successful the field.

Although a patent whitethorn forestall competitors from utilizing oregon commercializing a peculiar product, it is important to admit that patents subordinate to technologies alternatively than circumstantial products. A azygous merchandise mightiness incorporate galore patented technologies and frankincense beryllium taxable to the exclusionary rights of galore antithetic patentees. Consider, for example, a modern car. How galore patented technologies does it contain? There are patents pertaining to antithetic aspects of the battery, the machine systems, the heating and cooling systems, the outer camera system, the creation of the tires, the motor oregon electrical motors, etc. A car shaper indispensable ain oregon licence the rights to each of the patents for the technologies it uses, oregon hazard being dragged done the courts successful patent infringement lawsuits. Simply owning a patent that covers a peculiar merchandise does not confer a ineligible close to make, usage oregon merchantability that product; it lone confers a ineligible close to forestall others from doing truthful without permission.

Because patents subordinate to technologies, and due to the fact that technologies are incremental successful nature, a poorly designed patent strategy tin really impede innovation alternatively than augment it. If the patent word is excessively long, for example, pioneers and aboriginal innovators successful a technological tract tin exert disproportionate power implicit (and extract undue profits from) aboriginal innovators, thereby discouraging aboriginal innovation. Let’s proceed with the car hypothetical to illuminate this point. Imagine that Inventor A has a patent connected a generic wheel. Inventor B has a patent connected a instrumentality that contains a rubber surface. And Inventor C has a patent connected a instrumentality containing an inflated rubber tire. An automaker wants to present a caller enactment of wheels with inflated rubber tires that person reinforced sidewalls and treads. Even though nary of Inventors A, B and C contemplated tires with reinforced sidewalls oregon treads, the automaker’s caller wheels would nevertheless signifier each of their patents. The automaker would, therefore, request to negociate a licence with each of the anterior inventors, and immoderate 1 of the inventors could artifact the automaker’s caller merchandise by refusing to assistance specified a license. Faced with these headwinds, the automaker could determine not to make the caller wheels astatine all, alternatively opting for existing alternatives. If the patents owned by Inventors A and B had expired, however, the automaker would beryllium much consenting to make the caller wheels due to the fact that it would lone necessitate a licence from Inventor C. It is, therefore, important for patents to expire wrong a tenable clip framework to forestall them from choking retired aboriginal innovation. Patents request lone past agelong capable to supply innovators with an capable inducement to put successful processing caller technologies.

The patent system’s capableness to impair innovation is compounded by errors made by the U.S. Patent and Trademark Office (the “Patent Office”) during examination. The Patent Office serves arsenic the gatekeeper for the issuance of caller patents, allowing patent applications to contented arsenic patents lone erstwhile they fulfill respective criteria:

1. The alleged invention is novel, that is, it has ne'er been made oregon described successful a work before.
2. The alleged invention is non-obvious, that is, it is much than a regular modification of thing that was made oregon described before.
3. The patent describes the alleged invention successful item and further describes however to marque and usage it.
4. The patent’s claims, that is, the scope of the exclusionary rights conferred by the patent, are sufficiently constrictive specified that they bash not encompass taxable substance that was already known oregon that the patent does not adequately disclose.
5. The patent’s claims are unambiguous specified that the nationalist has due announcement of what falls wrong the patent’s exclusionary rights and what does not.

In short, the Patent Office attempts to lone let a patent to beryllium issued erstwhile it describes an existent invention and is narrowly and intelligibly tailored to that invention. Unfortunately, making the close determination regarding the supra criteria is simply a challenging and time-consuming task, and the Patent Office’s employees evaluating patent applications (known arsenic “examiners”) person constricted clip to measure each exertion fixed that implicit fractional a cardinal caller patent applications are filed each year. As a result, galore patents are granted that either bash not picture existent inventions, convey exclusionary rights that acold transcend the scope of immoderate invention disclosed, and/or are simply vague arsenic to their exclusionary rights. These patents are “invalid” and unenforceable, though 1 ne'er knows for definite whether a patent is so invalid until a tribunal (or successful immoderate cases, the Patent Office) issues a judgement uncovering that it is invalid. When a patent practitioner suspects that a patent would beryllium recovered invalid if enactment to the test, the practitioner mightiness notation to the patent arsenic being “low quality.”

An abundance of low-quality patents successful circulation serves arsenic a further resistance connected innovation and economical enactment due to the fact that these patents are often utilized by patentees to extract costly licenses and settlements from manufacturers and different companies that build, sell, oregon usage technology. Proving that a low-quality patent is invalid and hence unenforceable/worthless, oregon that it does not screen a peculiar merchandise (i.e., “is not infringed”), typically costs good implicit $1 cardinal successful ineligible fees, and determination is nary warrant of success. As such, galore companies opt to wage disconnected holders of low-quality patents contempt believing that they person nary ineligible work to bash so. Acquiring and asserting low-quality patents to extract these nuisance payoffs — what is derogatorily referred to arsenic “patent trolling” — has go a lucrative concern exemplary successful caller years. Small and start-up companies are often deed hardest by patent trolling due to the fact that they person constricted resources to support themselves successful tribunal and/or wage for licenses. In short, the issuance of important numbers of low-quality patents impedes innovation and economical maturation by yet imposing unjustified costs connected companies that really physique things, disincentivizing caller productive enterprises.

A patent strategy should, therefore, beryllium designed to optimize patent word magnitude (not excessively abbreviated to supply meaningful incentives to innovate but besides not truthful agelong that aboriginal innovation is choked retired by a thicket of excessively galore existing patents) and minimize the issuance of low-quality patents. A poorly designed patent strategy tin impair innovation and economical maturation to the aforesaid grade that a well-designed patent strategy tin augment them.

II. As Technological Advancement Accelerates, Less Patent Term Is Needed.

The existent word for U.S. patents is 20 years from the clip an inventor submits a patent exertion to the Patent Office. This patent word was modified successful 1994 from the patent word provided by the Patent Act of 1952 but is astir equivalent successful full length.²

One request not beryllium a historiographer of economics to recognize that it took longer and was much costly to commercialize caller products successful 1952 than today. The innovators of 1952 did not person entree to, for example, offshore declaration manufacturers that accommodate rapidly to caller products and tin summation measurement rapidly and astatine debased cost. Nor did they person entree to today’s responsive proviso chains, which are capable to bring caller products from conception to the support successful grounds time. Every facet of merchandise manufacturing and organisation took longer and was much costly successful 1952.

Product selling and income were besides much challenging successful 1952 than they are today. Decades earlier the internet, innovators educated consumers connected caller products via people advertising, tv advertising, income representatives, etc. This was a dilatory and costly process. Today, intelligent net algorithms let consumers to find precisely what they request successful seconds, and adjacent expect consumers’ needs and desires utilizing targeting advertising. The emergence of platforms similar Amazon has dramatically reduced the outgo of selling and income of caller products.

As Booth explains successful his book, these trends volition nary uncertainty proceed exponentially into the future. Manufacturing facilities volition utilize much blase automation instrumentality and incorporated processing technologies similar 3D printing, driving costs down and responsiveness up. Logistics volition besides employment much automation specified arsenic driverless vehicles, reducing transport costs and shipping time. Marketing algorithms volition find customers with greater efficiency. Eventually, customers mightiness routinely 3D people caller products straight to their homes, reducing the lag betwixt merchandise conception and merchandise income to near-zero.

Not lone are the costs and clip associated with bringing caller products to marketplace decreasing implicit time, truthful is the outgo of processing caller patentable technologies. The accrued usage of artificial quality and instrumentality learning successful the invention process has been a blistery taxable successful caller years. These technologies tin already execute overmuch of the enactment classically associated with innovation, and determination person adjacent been examples of AI algorithms conceiving of implicit inventions. As these technologies proceed to develop, the outgo of innovating caller products volition proceed to alteration and the velocity astatine which caller technologies are developed volition proceed to increase.

And finally, exertion is adjacent decreasing the outgo associated with transferring and monetizing patents. IBM and IPwe announced successful 2021 that they had “plans to statesman representing patents arsenic non-fungible tokens (NFTs) oregon integer assets” to “help presumption patents to beryllium much easy sold, traded, commercialized oregon different monetized and bring caller liquidity to this plus people for investors and innovators.” As patents go much liquid and easy monetized, their worth increases.

As discussed above, the patent strategy is designed to supply a fiscal reward to innovators to incentivize bringing caller technologies to market, which it accomplishes by providing inventors with a static 20-year play successful which they person exclusive rights to their inventions. If 20 years of exclusivity was capable to incentivize innovation successful 1952 (which it was, arsenic evidenced by the accelerated technology-driven summation successful modular of surviving during the mid-20th century), past contiguous that aforesaid exclusivity play is overcompensating innovators. The outgo of innovating caller products, the outgo of bringing those products to market, the outgo of selling those products, and the clip needed to bring those products to marketplace (i.e., the payback period) person each plummeted, and the fig of caller innovations a patent mightiness laic assertion to successful a fixed 20-year play has exponentially increased. Yet the 20-year patent word remains fundamentally unchanged.

The nonaccomplishment of the patent strategy to accommodate to exponential technological maturation has fixed emergence to the problems associated with unduly long-lived patents discussed above. Whereas successful 1952 it mightiness person been tenable for a patent filed successful 1932 to screen follow-on exertion developed successful 1952, contiguous the calculus is acold different. Much little technological improvement occurred betwixt 1932 and 1952 than occurred betwixt 2002 and 2022, and the outgo of innovating was acold higher. But due to the fact that the patent word has not been meaningfully updated, it is not uncommon to spot a 2002 patent connected immoderate crude telecommunications exertion asserted successful tribunal against the manufacturers of cutting-edge 5G products and systems. Indeed, due to the fact that modern exertion companies look patents from a afloat 20 years of accelerated technological growth, their imaginable patent liability successful processing caller products tin beryllium fundamentally unknowable. This tin person the effect of narrowing the rollout of caller products to lone the largest companies with the resources to navigate and support against specified patent thickets, accelerating consolidation and monopolization.

The static 20-year patent word besides provides expanding incentives for individuals and companies to record debased prime patent applications, further clogging the arteries of the Patent Office and providing patent trolls with ammunition to parasitize aboriginal exertion companies. As noted above, the Patent Office’s occupation is to forestall these applications from issuing arsenic patents, but assets constraints successful the look of ever-increasing exertion rates needfully means that immoderate low-quality patent applications volition contented arsenic low-quality patents. The expanding complaint of technological improvement enhances the worth of these low-quality patents, arsenic patent trolls looking to asseverate these patents volition spot much imaginable targets during a 20-year play than they would person seen successful anterior years. Thus, adjacent erstwhile a idiosyncratic has an thought that she does not judge is inventive oregon has contiguous commercialized value, the 20-year patent word progressively incentivizes seeking a patent due to the fact that the patent tin beryllium utilized to extract nuisance payoffs from unforeseen innovators successful the distant future. The issuance of low-quality patents has lone antagonistic economical effects, yet facilitating a transportation of wealthiness from productive companies to parasitic patent trolls, and frankincense the static 20-year patent word that rewards seeking low-quality patents is suboptimal.

In sum, the architects of the existent patent strategy did not origin successful the exponential complaint of technological growth, which has implicit clip brought the patent strategy severely retired of alignment with reality. The 20-year patent word present provides excess incentives to innovators astatine the outgo of aboriginal innovators, giving emergence to respective antagonistic effects. Patents from the distant past are present a resistance connected caller innovation. The largest companies are much resilient to patent enforcement, driving monopolization successful exertion industries. And radical are incentivized to question patent extortion for non-inventions, congesting the Patent Office and fueling patent trolls.

Amending the patent word to beryllium responsive to exponential technological advancement would instantly payment the system by mitigating the above-discussed issues. The caller regularisation would supply a docket of word lengths for recently issued patents successful which the presumption alteration implicit time.³ A patent issued successful 2030 would person a shorter word than a patent issued successful 2022. The patent word lengths would ideally illness toward zero arsenic humanity approaches the theoretical technological singularity, astatine which constituent exertion volition advancement truthful rapidly that the patent strategy — which presently takes years to contented patents and years to enforce them — volition person nary anticipation of keeping pace. Patent instrumentality mightiness past beryllium abandoned altogether, leaving first-mover vantage and estimation enhancement arsenic the superior incentives to innovate. Indeed, the costs of innovating, commercializing inventions and uncovering customers successful the distant aboriginal volition beryllium truthful debased that patent extortion mightiness beryllium wholly unnecessary.

III. Monetary Debasement Incentivizes Seeking Low Quality Patents That Are Harmful To The Economy.

It is good understood successful the Bitcoin community, arsenic good arsenic by savvy investors, that a nation’s debasement of its currency by expanding the wealth proviso has tremendous impacts connected concern enactment and outcomes. Seeking a patent is an investment, and frankincense patent enactment and outcomes are besides manipulated by monetary debasement.

For simplicity, the beneath treatment refers to economies taxable to important monetary debasement arsenic “inflationary” and economies that person hard wealth (i.e., hyperbitcoinized economies wherever prices are governed chiefly by deflationary technological progress) arsenic “deflationary.” In an inflationary system, today’s wealth is fundamentally guaranteed to alteration successful worth implicit time, whereas goods and services volition summation successful terms implicit time. In a deflationary system, the other is true: Today’s wealth volition summation successful worth implicit clip and goods and services volition alteration successful terms implicit time. Inflationary systems incentivize speculation (i.e., spending today’s wealth connected assets that volition apt admit successful nominal terms), whereas deflationary systems incentivize redeeming (i.e., holding today’s wealth to bargain cheaper goods and services successful the aboriginal erstwhile they are much needed).

Just arsenic fiscal markets and existent property tin beryllium taxable to rampant speculation successful inflationary systems, so, too, tin patenting activity. Consider, for example, the pursuing hypothetical. A researcher successful a institution develops a caller thought for a car exertion and submits a statement of that exertion to the applicable concern manager. The manager indispensable determine whether to record a patent exertion for the technology. She estimates that the outgo of seeking a patent is $20,000, comprising lawyer fees and Patent Office filing fees. The institution is not readying connected processing immoderate caller products that would usage the technology, and successful fact, the manager doubts that immoderate caller aspects of the exertion are really useful. Nevertheless, due to the fact that the $20,000 successful the manager’s fund volition alteration successful worth if unused, and due to the fact that the car marketplace is expected to summation exponentially successful nominal worth successful the coming 20 years erstwhile the patent would beryllium enforceable, the manager decides to determination guardant with seeking a patent connected the technology. Even a debased probability that the institution tin 1 time extract a nuisance payoff from a rival makes the patent a worthwhile investment. If the mean car successful 20 years is expected to outgo $500,000, past adjacent a precise debased probability of extracting immoderate worth of the car marketplace tin person a precocious speculative value. The expected ostentation successful ineligible costs associated with defending against patent infringement lawsuits further increases the speculative worth of the patent, arsenic aboriginal competitors volition beryllium incentivized to settee frivolous infringement lawsuits alternatively than support themselves.

Now see the aforesaid hypothetical successful a deflationary bitcoinized system. The manager knows that the 0.01 bitcoin required to get a patent volition summation successful purchasing powerfulness implicit the adjacent 20 years, whereas cars volition go cheaper and cheaper implicit that clip owed to technological advancement. In different words, the contiguous outgo of obtaining patent rights 20 years successful the aboriginal successful a deflationary strategy is highly high, whereas the imaginable reward tin beryllium precise low. Without a wide way for rapidly monetizing the technology, specified arsenic by implementing it successful upcoming products, the manager is much apt to prevention the bitcoin for a amended concern opportunity.

Accordingly, inflationary systems incentivize the speculative proliferation of low-quality patents, which clog the Patent Office and effect successful parasitic patent-trolling activity. Deflationary systems, by contrast, incentivize prudence successful patenting decisions, focusing scarce monetary resources connected protecting lone high-value inventions and reducing the profitability of parasitic patent-trolling. Transitioning from our existent inflationary strategy to a deflationary strategy based connected bitcoin would frankincense apt heal galore of the ailments with the patent strategy we spot today.

IV. Conclusion

Many observers person criticized the patent strategy successful caller years arsenic being breached oregon antagonistic to its ain objectives. Patent trolls are a persistent occupation for exertion companies. Vast patent thickets amassed by the largest corporations tin beryllium utilized to drown retired contention from smaller marketplace entrants. And the Patent Office is truthful inundated with patent applications that it has trouble keeping gait portion assuring that lone high-quality applications are issued arsenic patents. The effect is that galore innovators consciousness threatened oregon taxed, alternatively than empowered, by the patent system.

If the author’s thesis is correct, the dysfunction of the contiguous strategy stems mostly — if not wholly — from the information that it was designed for the U.S. system of 1952, which is agelong gone. The 1952 system was defined by slower technological advancement and slower monetary enlargement nether the golden standard. The patent laws person not meaningfully adapted to these changes, and frankincense the manus has outgrown the glove.

As a Bitcoiner, the writer indispensable ever ask, “Does bitcoin hole this?” The reply is yes, to immoderate degree, due to the fact that dependable wealth reduces the inducement to speculate that is astatine the basal of astatine slightest immoderate of the patent system’s problems. But adjacent nether a bitcoin standard, the patent word awarded to recently issued patents volition apt request to decay implicit clip to set to the exponential complaint of technological progress. If humanity genuinely is approaching a singularity wherein the complaint of technological advancement exceeds our quality to comprehend it, the absurdity of a static 20-year patent duration volition yet go evident to everyone.

As a last note, though this nonfiction has focused connected the U.S. patent system, determination are apt galore different examples of ineligible frameworks that are presently dysfunctional for failing to accommodate to monetary debasement and/or accelerating technological progress. Similarly, determination are nary uncertainty ineligible frameworks with much caller origins that are well-adapted to our inflationary strategy but volition go hopelessly dysfunctional nether a aboriginal deflationary bitcoin standard. The writer calls connected Bitcoiners with expertise successful these assorted areas to assistance hole for a bitcoinized aboriginal by analyzing however different existing ineligible systems volition request to beryllium updated.

Footnotes

1. This treatment of patent instrumentality is greatly simplified and excludes jargon to convey lone the basal concepts that subordinate to this article’s thesis.

2. The archetypal 1952 patent word was 17 years from the day the patent was issued. Because it was emblematic for patents to contented a fewer years aft filing, the alteration to 20 years from patent filing did not materially change the wide patent term. The alteration was intended chiefly to extremity a strategical signifier by immoderate patent applicants to intentionally support their patents from issuing arsenic agelong arsenic imaginable truthful they could widen their exclusionary rights into the distant future. This was known colloquially arsenic “patent ambush” utilizing “submarine patents,” referring to the patents’ quality to look with a afloat patent word a decennary oregon much — sometimes aggregate decades — aft their filing date, unfairly astonishing competitors who whitethorn person independently developed the patented exertion portion the exertion was pending.

3. In the author’s experience, the lone manufacture perchance deserving of extended exclusionary rights is pharmaceuticals/therapeutics, owed to the costly investigating required to beryllium information and efficacy for a caller drug. The patent strategy is not needed to supply immoderate specified extended rights, however, arsenic the Food and Drug Administration already has its ain parallel mechanisms for granting exclusionary rights to cause makers.

This is simply a impermanent station by Million Plebs. Opinions expressed are wholly their ain and bash not needfully bespeak those of BTC, Inc. oregon Bitcoin Magazine.