Protecting Design

Re: [spiers] Protecting Design


On Wed, 10 May 2006 09:13:27 -0500, "sudhakar gadkari"

wrote :

> Hi John,
> If I have an idea which changes the way certain clothing are made radically
> but very attractive as convenience for consumer, how would I go about
> discussing this idea with manufacturer making sure that he would not by-pass
> me if he decides to use it in his product? I know from your class that
> patenting is not a viable option. Any suggestion?
> Sudha
>

Sudha,

I very much like this question, and I decided to reflect a bit before answering,
which means
my answer will be long.

A couple of things to keep in mind: first, we all think our ideas are going to
change the
world, and there is a lot of money to be made on our idea. Aside from the fact
that all our
ideas are based on other ideas, the fact is it takes time for an idea to work
its way out into
the popular world.

Normally the process is something is introduced initially, and it is actually
not yet the best
version, limited in usefulness, takes a while to get and of course is quite
expensive.

Over time it ever improves based on market feedback, leading to more, better,
cheaper
faster.

Usually what motivates someone to introduce something new is the thing itself,
to be
introduced. And the person who does the introduction is someone with a passion
for the
introduction.

Working at the high end of the market, we invest say $5000 and earn $5000 gross,
and
continue to do so as we ever improve our item, and add complementary items as we
grow our
business.

Over time, as our items become more popular, a couple of things happen.
Competitors begin
to offer our customers alternatives to our items. They do not steal our ideas,
they simply
offer something that is more attractive. We sell blue hats, and a competitor
says to a
customer of ours. "try this red hat." We sell chocolates, and a florist says
"give flowers
instead." An early form of competition is items not like our own, merely
alternatives for our
customers. Nothing can protect you from this competition, you can only endeavor
to ever
better serve your customer.

Now we either continue to change the item, or we listen to our customers for new
unique
items. As long as we do this, we invest $5000 and gross $5000, as in the
example above.

Even if we do, our original items, the best sellers begin to get competition in
the form of
similar items. You begin to see diminishing returns. Invest $5000, gross
$5000; invest
$5000, gross $4000; invest $5000 gross $3000... when you see returns
diminishing, you
dump the item because there are so many other items you can work on where you
invest
$5000 and gross $5000.

Now here is a key point... since you love the field you are in, there is nothing
more interesting
to you than developing new products in that field, and to make it work you must
be gaining
$5000 on $5000 (or whatever the standard is in the field). When the money on an
item
begins to dwindle...fine, you are on to something else in the field.

What motivates the people you see thriving in small business international trade
is the
lifestyle they lead, not the money. Bill Gates himself has said it is not the
money, recently he
made the point of being the worlds richest man in fact limits his ability to
enjoy what he has.
Poor lad.

One reason he is so rich is because of intellectual property rights, which I'll
get back to.

For now, what happens to the item the small business person has abandoned since
he is not
getting his $5000 gross out of a $5000 transaction? Well, the factory has
production
capacity and the item is selling all the more, but the originator is losing
interest in the item.
Through some magical process, larger companies get ahold of the original idea,
and apply
economies of scale in manufacturing, finance, distribution and many others, and
lower the
cost of the item. This process makes the original good item available to an
ever wider group
of consumers, ultimately achieving the universal access to a material benefit.
Think of the
history of the cell phone. Think of the economically just distribution of
material benefits
from this system.

Now, when a big company uses economies of scale I do not have, and do not want,
to lower
the costs on an item by means I do not have and cannot afford, to make an item
available to
people I could not serve, what do i care? None of these people were my
customers anyway,
so why should i try to prevent anyone else from serving them? Or try to extract
some fee
when they do? It is just using the government to steal from the poor.

Now the argument will be as the 'inventor' of the item, I should be given some
royalty on
every unit that sells whether or not I am ever involved. There is nothing in
natural law to
support this argument, so it had to be developed in prescriptive law. Well, in
fact this is a
secondary reason, the primary reason for intellectual property is without it, no
one would
bother ever developing anything new and useful. Of course, this is sheer
nonsense. People
develop the new and different constantly without any thought of downstream gain.
In fact,
there are plenty of people who develop useful items specifically assuring they
will not get
downstream gain. In the software industry alone, there is "Eric Allman, author
of SendMail,
the program that delivers your words over the wires.. Larry Wall wrote Perl,
the freeware used
to organize Web sites... Brian Behlendorf created Apache, the program that
serves up Web
pages on demand; Paul Vixie ...wrote Bind, the program that translates words
into numbers,
letting us type www.sfgate.com instead of the string of numbers that really
constitutes a Web
address." (thanks to SFGate for that riff) all of these people developed these
items for free
and gave them away. Cuz they like it.

The whole intellectual property rights regime is a fraud on the consumer, in
which an
extremely few people benefit from a government-granted and enforced monopoly.

In certain fields, like medicines, the fraud is exponential, as govt agencies
erect barriers to
entry, which allow prices to go higher, profits to widen, which in turn are fed
into republican
think tanks who write articles saying how swell patents on medicines are for the
people.
(democrat think tanks are outraged over the rip-off, and want more taxes to
solve the
problem.)

So there is a small business person. He is living his chosen lifestyle, fully
engaged and
consumed by his work. He has left off an item someone else has now picked up
and is selling
the item to others. These others are customers the small biz person could never
have served
anyway. Why would the small business person possibly care if someone else does
serve the
poor? Usually, they do not. If anything, it sounds like a good idea for
someone else to lower
the price and make it available to the poor.

So to answer your question, you simply do not worry about intellectual property
rights. You
do not need them to live a happy and fulfilled life.

Unless. All govt programs create a "moral hazard." Although intellectual
property rights are
a fraud, we do have the regime in place. The moral hazard is it invites people
to join the
government in restraining the natural benefit of the price drop in goods and
services, making
them available to more and more people.

On the other hand, another chosen lifestyle is to jump on the bandwagon. Take
an idea you
inherited from the creativity of everyone before you, and hire lawyers to work
up intellectual
property rights contracts, file the forms, draft nondisclosure agreements, all
the steps
outlined in any college business textbook.

Bill Gates made an early mark by writing to the Stanford computer group to
criticize them for
giving software away when they should sell it under intellectual property rights
regime. He
has done very well playing by the book, and I suspect he does not regret his
wealth as much
as he says he does, if at all. Indeed, he has an army of tax lawyers in place
to make sure he
keeps it all.

The lawyers, the contracts, the lawsuits, the depositions, the time in court...
that too can be a
chosen lifestyle. Or something between the small business person I described
above, and the
Bill Gates character.

Extremely little of anything ever patented in USA has ever turned into an actual
product. Any
patent attorney can tell you this. The reason is the process for protection
naturally keeps an
item from gaining market feedback. So to go the protection route in biz is all
the more
unlikely to yield anything good for you.

If the supplier to whom you bring the idea for new clothes manufacturing process
will
continue to sell to you as long as you bring orders to him for customers you
gained by your
efforts, what do you care as to what else he does? If he will charge a premium
over his price
to you, to anyone who wants to buy your product directly from your supplier, and
he will give
this premium to you, then all bases are covered, it seems to me.

So, to my mind, the whole intellectual property rights question gets down to
what lifestyle do
you want?

John

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