It would actually be nice if there were a couple different schedules for such fees, and if one of those was based on the final sale cost. That would make "IP" a non-issue for no-charge free (as in beer, but also liberty) software.

I'm having trouble envisioning how selling some form of hardware at an extreme markup is necessary if the compulsory license fee for being able to copy it is a PORTION of the sale (and not profit) price?

That would ideally mean that someone else has decided to bring the product to market for more people, and that the actual inventors get rewarded for enriching society faster and more greatly in total.

I think there are some more fundamental problems with using sale price as the base of computation. What's "final" sale? Is it the price my company sells for wholesale? If I own my own vertically-integrated distribution network and sell direct to consumers, do I now owe the patent holder more per item? Am I incentivized to put my retail stores behind a shell company to bake the "final" sale price earlier in the pipeline? On that note, what's to stop me from doing so recursively? I could set up a "manufacturer" entity that produces the patented widget at a loss, paying the minimum licensing fee, and then an "assembler" entity that packages it into a meaningful product and actually makes all the profit. I suppose to some extent this is the same problem as deciding when to impose sales tax, so maybe the same regulation works there, but it feels trickier.

That's also setting aside what I expect are deal-breaking practical problems having to do with components. Most actual products are not patented in their entirety. If you use a patented design that improves one component of a $400 machine, is the license fee based on a fraction of $400? Do I owe the patent holder more per unit if I assemble my product with a high-quality aluminum shell instead of a cheap plastic one? If I have to use 5 different patent ideas to make that machine, do I pay all 5 owners the same fraction? If not, then who decides the respective fee for each one? (As an example, a modern smartphone probably makes use of hundreds of patents - think about how many patented bits of circuitry there are just in the radio and modem.)

Lets say this is 25% of the sale price. That is, society says that at most 25% of the sale, not profit, price is allowed to cover IP costs. In your fictional example of 5 different involved patents the legal framework incentivizes the 5 patent holders and those who desire their patents to negotiate a split.

Re the other question: no patent fees in sub-assemblies aren't counted, those things were already on the market as whole units. However a large corporation that is integrated across manufacturing many things (which presumably also has other market distortions like a huge IP portfolio anyway) would be able to count it, if they were also making those sub components. Yes that seems unfair to me, but it's a reflection of a different broken system and should be addressed there.

I'm not sure I'm following the story here. So we have compulsory licenses, which are to be set as no more than 25% of the licensee's sale price. Let's assume that the licensee accurately knows all of the patented ideas they plan to rely on. The prospective licensee needs to set aside 25 cents of every dollar to be paid to patent holders. So far, so good (although I don't think you'll be able to find a number that's satisfactory; see below). Now what do they actually do with those 25 cents? They can't unilaterally send it to any of the patent holders, because apportionment needs to happen. You can't require that they pre-negotiate a split among the patent holders, because that would defeat the point of a compulsory license by allowing one or more patent holders to drag out negotiations. You could set up a third-party entity (i.e. a government agency) whose job it is to hold all the payments in escrow and manage the negotiations among the patent holders, but that would require said entity to either bear the risks of dealing with bad-faith negotiators or be willing to make unilateral judgments based on the merits of an individual case - and given how well the USPTO does with bad-faith actors now, I don't think I trust them to take on an expanded role that would require dramatically more technical expertise and judgment.

re: 25% - I know you didn't mean to put any weight behind that particular number, but I also don't think there is any such number that would be universally reasonable. Again, I don't think many commercial products consist solely of the implementation of a single idea. Even if you're only basing your product on one patent, presumably you're also adding your own thought to make it marketable, and the amount that that new thought contributes is variable per product.

If you set the license fee ratio very high, then patent holders of small ideas can unduly enrich themselves by demanding most of the revenue for something to which they contributed only a small part. (That degenerates to the current situation - you can think of the current situation as having a "compulsory license" with a price that's often somewhere above 100% of sale price, since you can always proceed without a license, at the cost of a lawsuit that would recover the price plus punitive damages.) On the other hand, if you set it too low, then you open the door to blatant copying. And note that this isn't just a matter of picking something "in the middle" - no matter where you put the line, bad-faith actors will change their behavior to exploit it in one direction or another, or both.

However I believe the stopping point is exhaustion.

A license for X would be demanded when the first sale that uses X happens. If the IP is related to the formulation or formation of part of a capacitor then the payment for such is part of the price of that good and is not required or taken again at any other stage (other than in the price of the components already included in the BoM). Similarly, the price is reflected in the first transfer of the good, not in any final consumer sale of the unit.

Right, so this is trivially exploitable, as I described. Set up two entities. One of them makes the capacitor and "sells" them at cost, or lower, to the second one. The license fee will now be based on that deflated price. Arguably it's fraud, but proving that - and the extent to which it's out of the ordinary, since manufacturers do sell each other things at discounted bulk rates all the time - would be a nightmare.

Even if you close that loophole (e.g. with perfect fraud enforcement (ha)), you're incentivizing inefficiencies by punishing vertical integration. What if it's cheaper (less labor, less waste, less machinery, easier logistics, ...) to produce a whole circuit as one unit rather than building the capacitors first and then assembling? If the license price depends on the first transfer point, then the circuit manufacturer is better off wasting money and resources to isolate the patent-dependent components so that they can be transferred independently, with the licence fee coming out of that small price. Otherwise, they'd have to pay a fraction of the entire final product, which is presumably much greater.

I'd wonder if you'd see a lot of products sold "ready to assemble". The software is free, or some mandatory-license component costs pennies, but it's useless without the remaining bits to plug it into.

You get paid for creating value that people can derive from your products.. Nothing more.

Perhaps whether you can get a patent should depend on how much time has passed from when the invention was possible (existence of necessary prior inventions/science/etc.) and when you invented it. If nobody else thought of it for 10 years, maybe it's worth a patent but if it's an immediate consequence of something else, then perhaps it's obvious and deserves no protection.

That is quite an assumption, especially in assuming that the only way for governments to incentivize the development of technology is to give someone exclusive monopolies on those inventions.

We could give them grants, reward money, whatever. There are other ways to incentivize invention without tramping on companies and inventors' abilities to build upon the work of each other.

Not to mention that the development of 3D printers take hardware, which is quite expensive.

At some point all new technology is so expensive it's beyond reach, until it's not.. When governments force these things out of time with artificial incentives for political reasons often the market grows around it with poor incentives. The cost of which is filled long term for the negative by the tax payer.

The US interstate is a good example. If the government had waited until it was cheaper and the private sector would have done it then cities wouldn't have developed with such sprawl issues because the citizens and private markets would have had the opportunity to have paid for those costs and they wouldn't have. Cities would instead have been more dense and later when cheaper more viable public transportation systems were developed they would have been a lot more effective and more widely deployed.

Furthermore this takes resources away from the natural market growth that would have otherwise gone toward the natural market direction.

Let's look at software. Some of the most notable pieces of software, from postgres, to linux, to redis, are available under open source copyright license. Those licenses are intentionally waiving copyright law.

Inventions of those pieces of software happened with no expectation of IP.

Let's look at academic research: research institutes and academic institutes are more interested in getting published, advancing the arts, and improving their own name in the field than they are with patents. A large chunk of ground-breaking research done in academia or research-labs is done with the primary goal of getting a paper published out of it, and whether there's a patent or not, it's not what motivated the research. Often, there is no patent.

In fact, I think the open source software movement is the most obvious example of what happens when you don't have IP. The whole point of open source licenses is to defang copyright law (to use copyright law against itself). In the case of the Apache2 license, it also gives up patent rights. Within the open source software movement, innovation and profit are both common. Both happen in spite of the lack of IP protection.

Why is that the case? Well, software developers who create great things and release it into the open source world often want to increase their talents, increase their recognition, or solve a problem they or others are facing. Those motivations all exist even without IP nor profit motives. Some of them do have a profit motive and create open source software in order to be hired or in order to sell support (or for some other more complex funding model). Those also don't need IP laws to help them.

I admit, software is interesting. It can be argued to be an art in many ways, and it's much easier to accept that artists will continue producing art, even without financial or IP benefits.

However, I think that it's likely other fields where this holds as well. I think that someone who has an idea to improve a part of a car will still wish to publish the idea to gain recognition, or negotiate with an auto company to try and implement the idea to gain both fortune and fame. I think the drug companies will still wish to produce and sell drugs, and their research employees will still attempt to find new and better drugs, even with the only motive being commercial profit, not IP + commercial profit.

I think software provides ample evidence that you can profit off something even when IP is not in play. That the original inventor has enough of a headstart.

I forget the history of gcc but assume it was not the only c compiler? Anki is based on supermemo, etc.

Emacs was a novel invention, as was the concept of foss development.

I love foss but it’s often more about freedom and trust and community and improvement, more than about innovation.

However, I already pointed out that 3D printer are more expensive to develop due to involvement of physical objects rather than just writing line of codes.

In any case, governments are perfectly capable of funding big expensive projects should we wish them to do so.

Also, how does that investment get prioritized? What if the general public decides that some industry isn't worth investment, despite some people believing it is? Without patents, there is no way for the private sector to invest in R&D without just knowingly burning money.

I'm not saying government investment in research isn't a good idea. I think it is, and is something we should be doing more of, but it's not a replacement for patents.

If you look at polling, virtually everybody in our country would be in favor of repairing bridges/etc. Furthermore, both political parties in every major election for the past few decades have explicitly promised to enact massive funding for exactly this. Ergo - we're all voting in favor of major infrastructure funding - i.e. voting "yes, please, tax me and pay for bridge repair. Do it." The public will is absolutely behind this.

Our real problem is we're terrible judges of character - we elected people who just pocketed the money, instead.

Oops.