Side topic, but I really wish Planet Money would look into medical re-patenting. Growing up I needed albuterol inhalers occasionally and I remember them costing less than $10, but recently my kid needed one and it was $60 with copay (over $100 without insurance). That's when I found this article: http://www.nytimes.com/2013/10/13/us/the-soaring-cost-of-a-s...
TL;DR - Inhalers use CFC's (ozone hole making), but scientists and environmentalists recommended an exception for them when banning CFC's because the amounts were so tiny and the medical benefits so huge. The pharmaceutical industry decided to lobby against the exception so they could reformulate the inhaler and introduce a new patent - and make billions on a 30+ year old drug.
Frankly this leaves me wondering why we leave medicine to private companies when we have agreed as a society that public health is the governments concern.
Its unreasonable to expect a publicly traded company to do anything other than chase profits the best way they can.
Obviously "we" have not agreed that that is the case.
> Its unreasonable to expect a publicly traded company to do anything other than chase profits the best way they can.
And that attitude is why we can't have nice things. That would be what's known as "enabling." How about, "It's unreasonable to expect a beer company to do anything other than sell as much alcohol as they can, however they can, to whomever they can." Or, "It's unreasonable to expect an oil company to do anything other than ship and sell as much oil as they can as cheaply as they can."
No. Companies, publicly traded or not, are not mindless automatons, inhumanly calculating the optimal methods to extract as much profit as possible, even though they do seem that way. Companies are comprised of people, people who are a part of the society in which their company does business. Therefore they have--should have--the responsibility to behave ethically to society, not merely their shareholders. And even besides that, shareholders' ultimate interests are not served if their companies behave in ways that are destructive to the societies in which they live.
I don't know where this idea that "companies are required or expected to make as much profit as legally possible" came from, but it's 1) untrue, and 2) morally and ethically wrong, regardless of #1. Please stop enabling this behavior by spreading this incorrect and just plain wrong idea.
And even besides that, shareholders' ultimate interests are not served if their companies behave in ways that are destructive to the societies in which they live.
Unless the destruction occurs outside of the realm (spatial or temporal) of the shareholders, in which case the destruction can rightfully be modeled as an externality and ignored.
I don't know where this idea that "companies are required or expected to make as much profit as legally possible" came from
Please stop enabling this behavior by spreading this incorrect and just plain wrong idea.
It's more dangerous to assume that corporations can be held to task than it is to assume that they are amoral profit-seeking entities. Only in the former case are you unpleasantly surprised if you're wrong.
> Unless the destruction occurs outside of the realm (spatial or temporal) of the shareholders, in which case the destruction can rightfully be modeled as an externality and ignored. ... It's more dangerous to assume that corporations can be held to task than it is to assume that they are amoral profit-seeking entities. Only in the former case are you unpleasantly surprised if you're wrong.
You are missing the point just as the gp did. I never said that corporations can be held to task for such things.
I'm talking about what they _should_ do, i.e. right vs. wrong, i.e. morality. And such hypothetical destruction cannot _rightfully_ be ignored, because to do so is _morally wrong._
_That_ is the point. By continuing to miss it you are further illustrating the problem. Please wake up.
What part of "morality doesn't apply to businesses" don't you understand? Do you blame a cat for catching a mouse? Do you blame a cruise missile for destroying a target? Do you blame a tornado for eviscerating a house? There are things to which the lens of morality offers very little.
What you want to claim is that corporations should view their actions morally, and what everyone is telling you is that no they shouldn't. You present (as a sibling comment) the notion that a company given a choice between the "wrong but profitable" and the "right but less profitable" should choose the "right" thing.
And we're telling you, we're all telling you, that you cannot evaluate a corporation through such a calculus!
Is the corporation going to Heaven or Hell because of how it's lived its "life"? No. Is the corporation going to have more friends because it's been "nice"? No. Is the corporation going to have better credit because, goshdarnit, it really tried to "help"? No. Are consumers going to change their buying habits because of what the company has done to its workers? Probably not--just look at Nike.
Look, I dig the whole rage against the machine thing you're going for--I've been there myself. "There's morality in the world, goddamnit, there's right and wrong! We can't let the corporations run amok and ruin our nation and communities! This is a democracy! This is America!" you cry.
There is no America. There is no democracy. There is only Facebook and Google and Apple and IBM, Haliburton, GE, Tata Group, Phillip Morris, Alibaba, Mitsubishi. Those are the nations of the world today--or at least as far back as Network!
Is it monstrous? Absolutely. Is it something we should find an alternative to? Certainly. But is it something to which it is useful to apply human morality to? No, and it never will be--you must engage the beast where it lives, on its terms.
> What part of "morality doesn't apply to businesses" don't you understand?
What part of "businesses are comprised of and run by human beings" don't you understand? What part of "businesses have legal, ethical, and moral responsibilities to government and society" don't you understand? These are not wishes, these are reality.
> Do you blame a cat for catching a mouse? Do you blame a cruise missile for destroying a target? Do you blame a tornado for eviscerating a house? There are things to which the lens of morality offers very little.
Cats are not human beings, they are animals. They cannot think, speak, or reason.
Cruise missles are not human beings, they are machines.
Tornadoes are hot human beings, they are weather phenomena.
What is wrong with you? Are you just trolling or do you really think like this?
> And we're telling you, we're all telling you, that you cannot evaluate a corporation through such a calculus!
Certainly I can. And I will. And this is nothing new. This is why there are laws regulating corporations in a million ways, from financial regulations to the EPA to the FCC. For example, if morality had no bearing on corporations' actions, there would be no laws against insider trading, or price/wage fixing, monopoly abuse, etc. (And you can cry "ethics, not morality!" all you want, but ethics are ultimately based on morals. The principle of right vs. wrong remains.)
Where do you come up with this idea that corporations can do whatever they want in a mindless pursuit of profit? This is not the case, it never has been, and it continues to become less the case as more and more laws and regulations are enacted.
> There is no America. There is no democracy. There is only Facebook and Google and Apple and IBM, Haliburton, GE, Tata Group, Phillip Morris, Alibaba, Mitsubishi. Those are the nations of the world today--or at least as far back as Network!
Oh please. There is some truth to that idea, but it is not done, as you seem to think.
> Is it monstrous? Absolutely. Is it something we should find an alternative to? Certainly. But is it something to which it is useful to apply human morality to? No, and it never will be--you must engage the beast where it lives, on its terms.
If everyone thought like this, the United States (and many other nations) wouldn't even exist. It's because of those who had the courage to stand up and fight for change that we are having this conversation today.
Your attitude is useless. It is part of the problem. We need principled leadership that stands up for what is right, regardless of the status quo (or the perceived one).
For example, if morality had no bearing on corporations' actions, there would be no laws against insider trading, or price/wage fixing, monopoly abuse, etc
If you look at the history of such regulations, they're typically more about protecting the assets of the rich than they are about helping anyone else. They're still somewhat rampant--just look at Google and Apple cartel behavior re: engineer hiring, or the continual monopoly abuse of Comcast and AT&T.
It's only when the behavior becomes so egregious that it causes trouble for other stakeholders will legislators finally get around to stepping in.
Where do you come up with this idea that corporations can do whatever they want in a mindless pursuit of profit? This is not the case, it never has been, and it continues to become less the case as more and more laws and regulations are enacted.
History. Dutch East India Company, United Fruit Company, Union Carbide, Ford Motor Company, British Petroleum, Blackwater, Walmart, Pinkteron, Standard Oil, Enron, and on and on and on.
The laws and regulations only protect the existing companies--Sarbox has hurt smaller companies and startups more than its protected anyone else.
~
Look, we're on the same side here. You just need to make arguments that don't blindly ignore reality and history. If you want to continue this discussion, hit me up on email with your best rhetoric. Let's quit taking up space on this thread.
No, it's like no one understands that there are things more important than money.
That is one of the chief problems with large corporations: the people making the decisions are so far removed--insulated--from the consequences that they feel no responsibility for the negative effects on other entities.
The numerous examples of corruption, evil, and greed in large corporations should come as no surprise--it's built-in to the system.
And when someone points it out, there's one after another of people like yourself who exhibit a deafening WHOOSH with yet another, "but, but, but...money!" The single-mindedness is astounding.
>And even besides that, shareholders' ultimate interests are not served if their companies behave in ways that are destructive to the societies in which they live.
They can be. Say there are 1000 equal shareholders in a company, and they make up .01% of society. If they do $10,000,000 in damage to society they discount that by .01%, and just need to earn $1,000 as a company, one dollar each, in exchange in order for it to be "rational".
For A&E to work well needs A&E departments located within easy reach of an incident and to be staffed by people who are kept in practice and will operate immediately if required, instead of doing financial admin first.
Now this list of factors means you can always make money by shutting down A&E departments as they cannot do anything but operate at a loss.
However no matter how much money you make by doing so, you are increasing your own accidental mortality risk.
> That requires seeing everything as a matter of money. Not everything in life can be measured in dollars and cents.
What do you propose to measure it in then? There are situations where you can save X number of lives by doing Y hours of labor, and there are cases where Y is so much larger than X that you have to say no, we aren't going to do that. How do you propose to make that kind of decision without using some comparable measure of value?
Nobody can claim that the current situation is optimal. It's kind of terrible. But it isn't because we measure things using money.
Your comparison is a bit apples-and-oranges. I'm talking about a situation in which a corporation can decide to either a) do something, make more profit, but harm other people in the process; or b) not do that something, make less profit, and leave others unharmed.
In such a situation, the choice should be made without metrics and comparisons--it's a matter of right vs. wrong. That is what is missing from the decision-making process: morality.
If a company consistently does what's right they will be out competed by a company doing what's wrong. So they have to go a whole further level in their thinking.
It is a systemic problem with the incentives. If the CEO is moral enough to go against shareholder interest, he'll be replaced. If not, the board members will be replaced through vote and possibly sued for going counter to shareholder interests. If not, the shareholders will be replaced by shareholders a more ruthless out-competiting company.
Imploring everyone to just be more moral isn't going to fix the systemic problems.
Isn't it interesting that despite the ban on CFCs, and the lack of an exception for medicine, being something imposed by the government, your response is to blame the companies?
Don't get me wrong, I completely agree their lobbying is against the general interest of society, but it was the government that was elected to protect the interests of the public, and failed.
The point is, both the urge and the power to lobby against the interest of the people come from the private and profitable nature of their interests.
It was not a punctual failing of the moralities of the companies, it is a consequence of a system that stimulates them to do it and given them the power to do it successfully.
But what actually hurt the people wasn't the lobbying, it was the actual banning of the CFCs in medicinal applications, which wasn't made by company with private and profitable interests, but by the government!
What I believe you're missing is that the government is not an isolated entity in a vacuum. Its made of people and groups that make their case and express their interests.
In this case the interests of the private company prevailed. Notice that the proposal of not banning CFCs in medicinal applications was also a decision to be made by the government, but the pressure from the other side was simply not enough.
Mark Cuban funded the title with a $250,000 donation in 2012.
"The current state of patents and patent litigation in this country is shameful," said Cuban, owner of the Dallas Mavericks. "Silly patent lawsuits force prices to go up while competition and innovation suffer. That's bad for consumers and bad for business. It's time to fix our broken system, and EFF can help. So that's why part of my donation funds a new title for EFF Staff Attorney Julie Samuels: 'The Mark Cuban Chair to Eliminate Stupid Patents'."
As I read the title of the chair, my reaction went from "I can't believe Mark Cuban as a Chair named after him" to "That's just about right". Good for him.
Patent systems are definitely broken. I think that’s the conclusion of most neutral observers starting fresh and that digging past the purely abstract or ideological level. The reason it’s hard to do something about is that patents are property and the legal setup for property is foundational to an economy.
Patents are absolutely fundamental to the way medical research works today, especially the search for new treatments and medicines. That’s a tricky thing to mess around with. There are obvious problems. There are speculations about what fixing them could yield on one hand. In the other hand is a massive industry producing a lot of technology, science and actual treatments for diseases.
What seems (to me) to be missing in these debates is some humility about knowing the answers. While our culture is speeding through “movements” at a higher rate than ever before, we still tend to approach these big political/philosophical/economic issues with an early modern/modernist perspective. Our most popular philosophers for these matters are old dead guys who liked to think of big organic things like society and civilization in terms of how we should set things up if we had snapped into existence today, a clean slate. That’s a fairly pompous perspective.
In any case, I think the patents and intellectual property problem is a very tricky one to solve. Experiment with possible solutions is almost impossible. IP legally mimics regular property in a metaphor-like way. That metaphor is proving increasingly inaccurate. At the same time, we have huge pieces of our economy and whatnot built on it. At the same time our legal systems are showing signs that they might need a reimagining. Many of our legal constructs such as ‘legal entity’ or ‘jurisdiction’ are being pushed to extremes, and metaphors eventually break. Does the concept of a company legally approximating a person hold up when we have impenetrable layers of ownership across jurisdictions? Does the metaphor fray?
I am not an expert on the economics of pharmaceuticals, however based on work of an expert I have come to believe that patents are not essential to the way medical research works today.
Patents are essential to the current business model of pharmaceutical companies -- they are necessary to guarantee a return on investment, but the portion of the investment devoted to R&D and clinical trials is dwarfed by the marketing.
If you look at the big companies you can divide their budget into 4 big
categories. One is R&D, one is marketing and administration; the
other is profits, and the other is just the cost of making the pills and
putting them in the bottles and distributing them. The smallest of
those is R&D. The smallest is Research and development. Profits
usually are about the same. Marketing and Administration is
more than twice as much.
That's not an unreasonable perspective. But is the dynamic he describes predictable, is it the only dynamic or at least the dominant one? I assume he is not suggesting that the only effect will be minor adjustments to the way these industries work. If patents disappeared tomorrow, a tornado would run through the pharmaceutical world.
That doesn't mean that there aren't gains to be had from a moderate version of that approach. I just don't think there is a theoretical framework capable of telling us the right answer in economics. Economics is at its best more similar to zoology than physics. Zoology will not accurately predict the way species and populations will react to a reduction in available water sources or the introduction of new species. On the rare occasions that it's feasible, repeating the experiment will rarely yield the same result.
> I have come to believe that patents are not essential to the way medical research works today.
> Patents are essential to the current business model of pharmaceutical companies -- they are necessary to guarantee a return on investment, but the portion of the investment devoted to R&D and clinical trials is dwarfed by the marketing.
Your comment contradicts itself.
If, as you say, patents are "necessary to guarantee a return on investment", then it doesn't matter if the R&D is the largest cost or not, because the company won't produce a profit (and therefore won't produce new drugs) without the patent.
In fact, it's quite reasonable to think that both massive marketing and time-limited protection from competition are necessary to ensure enough of a return to guarantee continued investment into the industry. It doesn't have to be one or the other.
You're right -- it was not carefully written. My point is that the current pharma business model is not essential to medical research in general (rather than research today).
Patent protection for drugs (and chemicals in general) was weak or non-existent in Europe until the 1970's, and despite that there was research and development of drugs.
I think the system we have today is largely driven by the patent mechanism, and while not terrible, could be made better by tweaking the patent system.
The government sponsored monopoly is supposed to guarantee a return on the R&D, not guarantee the return on Superbowl ads for another erectile dysfunction drug.
> the legal setup for property is foundational to an economy.
I would agree on that had we not recently had a massive change away from products and property and into service and contracts. Citizens do not own cars, coffee machines, or books. They house devices which they have a licensed permission to use, and it is contract law that rules and not property law.
Patents could also easily be redefined as a contract between state and inventor, where inventor provide knowledge in return for privilege and protection. It doesn't change anything for the economy, but it would remove the need to talk about property and it would imply that the contract could be changed in the future.
Contract-derived interests rely on the parties to the contract having underlying property interests that can be exchanged via contact, so, no, contracts don't get you it off dealing with property law, since they depend on it.
Currently, contract law do not dictate if it can be exchanged. E-books might or might not be transferable, and its currently up to the e-book seller to decide if that is the case. Property law, as far as e-books are property, do not come into effect unless e-book is made to be governed by property rules.
Could you explain how property law comes into effect in this case? If it does not, why could patents not be treated in the exact same and equal way.
Property law is what provides the rights that are then sold by contract; in the case of ebooks, the rights specifically originate in copyright law. That's why the eBook seller had the choice of what rights (including whether or not they are transferable) to include in the contracts by which it transfers some rights to consumers.
The fact this patent was granted in the first place seems completely absurd. But then again, we live in a world where Boeing has a patent on certain trajectories that use the moon's gravity (http://www.google.co.uk/patents/US6116545), so it shouldn't really surprise me.
I recall a story a while back about a satellite that ended up in the wrong orbit after launch. The engineers knew how to correct it using various orbital maneuvers, but alas those maneuvers were patented and it was too expensive to license them. So the decision was made to splash the satellite and let the insurance companies pay out. At least that's my recollection...
Edit : Here's a description of the issue, which is a bit different than my recollection
> But then again, we live in a world where Boeing has a patent on certain trajectories that use the moon's gravity
Interesting. That particular patent was owned by Hughes Electronics, though, not Boeing [1]. EDIT: Apparently in 2000 Boeing acquired that division of Hughes Electronics [2] but the transfer of ownership of the patent was never recorded in the USPTO.
The patent expired in 2012 because the owner didn't pay the required "maintenance fee," which is a statutory fee that must be paid every few years to keep a patent alive [3]; see the end of the document to which you linked.
The patent system as it exists encourages this kind of behaviour. It's hardly surprising that people would take advantage of it. If he didn't do it, someone else would and a patent case to prove prior art gets expensive.
> It's unfortunate that the Patent Office can't ban trolls who have abused the system.
I agree with you on one hand but on the other is it impossible for a person to reform and later want a patent to protect their new creation? I'd just like to see the whole system overhauled or maybe even removed in some ways.
I would be ok with keeping the patent system only if it becomes far more difficult to gain a monopoly on an invention. The courts+USPTO allowed an era of serious abuse via patents on abstract inventions that we won't recover from quickly.
If you aren't yet an EFF member and you're happy about this ruling, please consider becoming a member. Membership dues help the EFF fight these battles.
When a patent gets overturned, can those who already paid license royalties typically sue the patent holder to get their money back? (I know that the entity can file bankruptcy, so the chance of getting money is slim). Or do the license agreements typically include a clause that money is not refundable if the patent is invalidated?
Or, even worse, do license agreements typically include language that says the licensee agrees to continue to pay royalties even if the patent is later found to be invalid? I can see someone being strong armed into signing an agreement like that.
It's only tangentially related, but it's a good story:
Apparently at some point an American producer licensed the patent for a mouthwash for a percentage of sale – I think it was Listerine, but can't find this story on Wikipedia right now. A decade or two later, the patent ran out. Anybody could now copy the formula without royalties. Except: the original licensor sued his american licensee for continued royalty payments. They won, because the initial contract never specified an end to the arrangement when the patent expired.
That case, Warner-Lambert Pharmaceutical v. John J. Reynolds, actually hinged on the fact that there was no patent license involved. Listerine's formula was a secret, and Jordan Lambert offered its creator royalties if he would share it with him. Later, the formula became widely known and Warner-Lambert wanted out of the deal since they were no longer getting any advantage from it. They sued to get out of their contract and recover past payments, citing patent cases as support for the idea that they should be set free of their obligations. The judge ruled that with patents, there is an understanding from the outset that they are paying for access to a time-limited monopoly, while the contract in this case was pretty clear about not having a termination date other than "whenever they stop making Listerine".
The current precedent in the United States is that a patent holder cannot collect royalties past the expiration of the patent, and license agreements requiring payments beyond expiration are unenforceable.
This doctrine is being challenged at the Supreme Court currently, in Kimble v. Marvel:
One wrinkle -- even under current case law, payments can still validly be collected for non-patent IP (most often trade secrets). Thus, the best practice from the licensor's is to delineate what portion of the royalty rate is attributable to the patent, the trade secret, the trademark, etc., and stop collecting each portion once the corresponding IP expires or is (finally, unappealably) held invalid.
A good license would probably say royalties are nonrefundable, and this makes sense -- if you threaten to sue me for $1 million and I settle for $25K, I've essentially paid to make the suit go away. So long as you don't sue me, I've got the benefit I bargained for. If it later turns out that the suit wouldn't have been valid, great, but it doesn't matter to me since I've already bought peace.
To your other question, though, no, a license that tried to force continued payments despite invalidation would be very atypical. In fact, to do so is currently per se unenforceable. (Note, though, that the Supreme Court might allow for some gray area in this rule in the coming months).
I am not sure if you're correct. In the This American Life episode on patents they interview someone discussing this precise issue, who is still on the hook for licensing fees despite someone else subsequently winning a patent action against the counterparty.
And for the 16 companies that did settle, the verdict may not change anything. In most cases, these licensing agreements have language that makes them nearly impossible to get out of, no matter what happens with the patent later on. This week, we heard back from a spokesman from one of the companies that chose to settle.
The spokesman wrote in an email, quote, "We were hit hard by this lawsuit. Infringement on our part seemed completely bogus, but we could not afford to fight it. Even with the settlement, we were forced to lay off employees. We are still--" and "still" is in all caps-- "still paying out on the settlement agreement. We were unaware that the patent had been invalidated. We will be contacting our attorney to see what recourse we may have."
It looks like in this case, it was more due to the licensee's inattention than a winning legal argument. (Unfortunately, this is an all-too-common occurrence, no matter what the law says.) I'd be curious to know what happened once they did contact their lawyer.
But what are they going to sue based on? If you have a contract of fees for patent use, and it becomes fees for nothing, it's no longer a contract, by definition.
If the only remaining thing is a fee to not sue for something they objectively have no rights to, that doesn't sounds like a proper exchange to me. But of course I'm not a lawyer.
Did the other person win a case about their use, or did they actually get the patent thrown out? Could make a big difference when it comes to others.
the USPTO is a laughing stock, they should consider some serious reform quickly or just being completely disbanded. they serve no valuable purpose other than to retard the whole of society for the future as far as i can tell...
The main reason it exists is to provide incentive for people to actually create things and to spend the money on R&D with a hope there will be a return. If I spend three years and $500,000 developing a new building material, I should be able to be protected from an employee of mine quitting and starting a new company doing the same thing from techniques he learned using my invention (for a certain period of time).
Software is a different beast, simply because the vagueness you can express in a software patent can be so general that it covers use cases almost retroactively.
Software patents should be extremely specific, regular patents work for the most part.
My thought has been that they need to go back to requiring a physical implementation. So, if you devise a hardware product that includes software, the whole thing can be patented, but not the specific algorithms. This eliminates all the business process patents and basically software patents as well.
I think a very large part of innovation comes from people who would do it anyway. Supporting them is great.
The current system is in everyone's worst interest. Getting there first shouldn't be worth as much as being able to provide an excellent quality of product or service - software or otherwise. You certainly shouldn't be able to hold up all of humanity's progress for the entire future because you can claim priority.
It has interviews with the patent holder, and it's amazing to hear his perspective. (Which I do not agree with.)