Amazon One-Click Patent Struck Down

The US patent office has ruled that enough prior art anticipated the one-click patent to rule a number of the major claims invalid.  Perhaps we should chalk up another win to Eric Maskin!

I’m pleased that the Amazon patent was ruled invalid but insufficient attention to prior art is not the main problem with current patent law.  Patent law needs to change so that patents would be ruled invalid or given much shorter lengths if they do not involve large, sunk costs.

Comments

The "one-click" patent has not yet been struck down. Pursuant to the Re-examination request, the PTO has merely issued a first Office Action in which it has rejected some of the claims. The assignee, Amazon, now has the ability to respond to the Office Action presnting arguments in favor of patentability and/or amendments to the rejected claims. The fat lady has not yet sung.

The idea is that patents should only be granted when the patentee has made significant sunk costs in R&D. More in the cited article.

If the law used sunk costs as a factor, would a $300 million movie deserve longer patent protection than a $1 million indie flick, because the sunk costs are greater?

Patents are supposed to not be obvious to people in the industry. Just how one-click is supposed to fulfill this criterion is beyond me.

And I STILL haven't activated it because I consider it to be a fundamentally flawed idea anyhow, so maybe that's why Amazon actually were the first to do it?

Copyrights too?

Sunk costs should be irrelevant in assessing patents. Intangibles are valued by their future incremental cash flows. A patents useful life, which is substantial to its value, should not be diluted by how much cash was thrown at it.

It's a very bad idea to tie patent protection to the amount spent on R&D. Patent protection is a form of reward (patent holders stand to gain financially from the patent), therefore making it conditional on prior spending will act as feedback loop rewarding spending, especially spending that can be easily be linked to the invention. But why should one reward spending? Isn't spending a loss? Isn't the true value of an invention apparent in the money you can earn from it, a measure of social benefit?

The current system, which establishes only innovation and usefullness, is better: Creating the most world-changing inventions while spending as little as possible is the dominant strategy. With the R&D cost-based system the dominant strategy would be massive spending just to increase the likelihood of obtaining a patent - an option open only to large organizations. The brilliant inventor laboring in a tiny lab would be at a disadvantage, and entry barriers for inventions would rise, clearly a bad outcome.

Patents should be there to allow an inventor to capture more of the social gains incident to his achievement (the useful invention), thus closing a positive feedback loop encouraging success, rather than effort. Paying for effort will produce more effort, but less success.

Rafal

I completely agree with Rafal. Usefulness of the patent, rather than the sunk costs involved should determine the reward for innovation/invention.

I agree that the patent incentive should be different for different technology areas. In some areas, like software, innovation is not driven by the patent rewards; these areas should have weak or no patents. Other areas, like pharmaceuticals, are driven by patent rewards; these areas should have stronger patent rewards.

But, conditioning the patent reward on the R&D done in a specific case just seems to be rewarding waste like Rafal says.

The real trick is how you assign which R&D spending to which patent. Does 3M get to claim all of its failed glue research as sunk costs for post-it notes, or only the 10 seconds in which a researcher realized there was a use for a glue that can be easily pulled apart?

If the law used sunk costs as a factor, would a $300 million movie deserve longer patent protection than a $1 million indie flick, because the sunk costs are greater?

Copyrights last too long also. Seventy years plus life is ridiculous. The first copyrights in England lasted only fourteen years and I've been told the first American copyrights lasted only seven. I believe copyrights should last a few decades at most (perhaps 25-30 years).

company names are covered by trademarks.

Does anybody else agree that Mr. Anderson likes to make ad hominem attacks?

On a more serious note, I think Rafal's analysis falls down on the fact that he counts the patent as a monetary reward. In fact, for most companies and for most patents, the cost of patenting exceeds the monetary benefit. A patent will produce and expected average return that exceeds the cost of filing the patent (ball park $15,000) when there is 1) a very valuable innovation, 2) which has no easy way to work around, and 3) applies to a very valuable market, and 4) the possibility of enforcing infringement is high. Thus the value of the patent is already tied to its social value (3 of the 4 factors). Essentially, a few blockbuster patents generally pay for a large number of relatively worthless patents.

The second important aspect is that patenting costs are a small fraction of innovation costs. It doesn't make sense to spend millions more on R&D to try and get a better patent, when spending 10's of thousands spent on patent attorneys could do the same trick. Furthermore, surveys of R&D managers has shown that obtaining a patent is not a main driver for R&D spending.

The end result is that R&D-cost based patenting would primarily change company patenting behavior without changing their R&D behavior. Companies with high R&D costs per patent (like pharmaceutical companies) would patent more while those with very low R&D costs (so-called "patent trolls" comprised entirely of patent attorneys) would patent less.

It's quite ironic that Rafal, who is arguing for patents to be valued based on their market price, is being called a communist by people arguing for patents to be valued based on the effort required to invent.

That somehow seems...backward...to me.

It's a very bad idea to tie patent protection to the amount spent on R&D. Patent protection is a form of reward (patent holders stand to gain financially from the patent), therefore making it conditional on prior spending will act as feedback loop rewarding spending, especially spending that can be easily be linked to the invention. But why should one reward spending? Isn't spending a loss? Isn't the true value of an invention apparent in the money you can earn from it, a measure of social benefit?

Patents are a monopoly and a barrier to innovation, not a reward for it. After all, innovators can earn competitive rents by exploiting their first mover advantage and in many cases selling complementary services. Patents don't guarantee a profit on patented inventions, and the PTO is filled with patents on inventions that never earned a dime.
Patents have also been used to undermine non-patent holders' civil liberties and the rule of law, as Jonathan Hornblower found out at the unclean hands of James Watt and Matthew Boulton.

The "line" in defining large sunk costs is the time it takes the corporation's average variable cost curve to approach their average total cost curve. In the short run, ATC > AVC because our sunk costs are fixed, but in the long run, our firm's variable cost = total cost because they are able to substitute sunk costs and variable costs more easily.

In my opinion, sunk costs should generally determine patent length, but at the same time we should provide incentives for companies to discover new products, methods, etc. that have a large benefit for humanity but a lack of incentive to devote money to in R&D. Case in point, the reward to put a robot on the moon (provided by a private company), or a hypothetical $3,000,000,000 bounty to discover a cure for AIDS that is patent free. In fact, forget the $3,000,000,000, determine the prize after the cure is found in order to determine the sunk costs involved in finding a cure and avoid any DWL in prize money. And yes, I think the government should foot the bill for the prize money. Instead of spending tens of billions in Iraq, how many problems in third world countries could our economy have solved?

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