Tue, 25 Oct 2005

The Economist on Patents in IT

As Kim Weatherall points out, the Economist is running a special on IP (really, patents) in IT. While acknowledging that there are issues with current IP law, they like the phrase a "market for ideas". (BTW, Kim, The Economist have endorsed 14+14 copyright twice that I am aware, the second time as an aside).

The Economist, despite vigilance, does sometimes stray from pro-capitalist (free market good) and pro-capital (current incumbents good), and this is one of those cases. While they offer the usual commentry about the patent system not working well, they don't weigh in on what to change; without this analysis, they seem to feel the problems are cosmetic. They don't see anything wrong with patent trolls: they like the concept of idea factories, and who wouldn't? Too bad noone seems to be actually doing this. One interesting point is their belief US & Europe will balance their IP policies once India and China start to become "IP producers".

The actual market, of course, is not of "ideas" but of "exclusivity of ideas": an extremely perishable product which requires significant infrastructure. In other words, high costs are inherent, not cosmetic. You need lawyers and a government warrant to create one, and you certainly need lawyers to trade in them. "Deep markets" need many players and much trading, not high barriers and increasing costs which are the current trend.

Ideas are currently traded, in existing markets, encased in real products and services. The "idea market" is parasitic on this market: ideas are extracted and sold separately on the patent market. Note that this is the important market: unused ideas are useless. The migration from a fairly well-functioning marketplace with decreasing barriers, to a poorly-functioning marketplace with inherently higher barriers is attractive for businesses, but should be extremely concerning for everyone else, such as the Economist.

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