Litigation by Patent Trolls Has Cost Half a Trillion Dollars in Lost Wealth in the Last 20 Years and Decreased Innovation Incentives in Software and Related Industries

Litigation by patent trolls, also called non-practicing entities (NPEs) because they produce or manufacture nothing but merely manage patent portfolios, have cost a half a trillion dollars in lost wealth in the period from 1990 to 2010 or $80 billion per year according to a study by James Bessen, Jennifer Ford and Michael J. Meurer in THE PRIVATE AND SOCIAL COSTS OF PATENT TROLLS, Boston University School of Law Working Paper No. 11-45 (September 19, 2011), Revision of November 9, 2011. The authors write in their Executive Summary:

"[A] self-described new crop of NPEs has emerged that asserts patents and litigates them on an unprecedented scale, involving thousands of defendants every year in hundreds of lawsuits. Do these litigating NPEs improve markets for technology and increase incentives for small inventors? Or are they “patent trolls” who exploit weaknesses in the patent system?

This paper makes several findings about this litigation.

First, by observing what happens to a defendant’s stock price around the filing of a patent lawsuit, we are able to assess the effect of the lawsuit on the firm’s wealth, after taking into account general market trends and random factors affecting the individual stock. We find that NPE lawsuits are associated with half a trillion dollars of lost wealth to defendants from 1990 through 2010. During the last four years the lost wealth has averaged over $80 billion per year. These defendants are mostly technology companies who invest heavily in R&D. To the extent that this litigation represents an unavoidable business cost to technology developers, it reduces the profits that these firms make on their technology investments. That is, these lawsuits substantially reduce their incentives to innovate.

Second, by exploring publicly listed NPEs, we find that very little of this loss of wealth represents a transfer to inventors. This suggests that the loss of incentives to the defendant firms is not matched by an increase in incentives to other inventors.

Third, the characteristics of this litigation are distinctive: it is focused on software and related technologies, it targets firms that have already developed technology, and most of these lawsuits involve multiple large companies as defendants. These characteristics suggest that this litigation exploits weaknesses in the patent system. In our book Patent Failure, we argue that patents on software and business methods are litigated much more frequently because they have“fuzzy boundaries.” The scope of these patents is not clear, they are often written in vague language, and technology companies cannot easily find them and understand what they claim. It appears that much of the NPE litigation takes advantages of these weaknesses.

We conclude that the loss of billions of dollars of wealth associated with these lawsuits harms society. While the lawsuits increase incentives to acquire vague, over-reaching patents, they decrease incentives for real innovation overall."

[emphasis added by LawPundit]

Read the whole thing here.

The paper has been referenced by the blawg
beSpacific

Federal Spending on Academic Research and the Impact of Bayh-Dole on Patents, Revenues and University Research: Giving Away the Company Store: Another Reason Why the Federal Government Has No Money

The role of the federal government and federal spending in contributing to American innovation is an especially interesting aspect of intellectual property law.

Christine M. Matthews in Federal Support for Academic Research, June 17, 2011, Congressional Research Service, writes:

"Historically, the federal government has been the primary source of funding for basic research at colleges and universities. In FY[fiscal year]2008, the federal government provided approximately 60% of an estimated $51.9 billion of R&D funds expended by academic institutions.[National Science Foundation, “Universities Report $55 Billion in Science and Engineering R&D Spending for FY2009: Redesigned Survey to Launch in 2010,” InfoBrief, NSF10-329, September 2010, p.1. ]"

Prior to 1980, university research was not commercialized and academic discoveries and inventions flowed into the public domain where they could be used by all, greatly boosting the American economy. Since Bayh-Dole, it has been a downhill slide.

On December 12, 1980, as written at AUTM.net, the Association of University Technology Managers:

"The Bayh-Dole Act (P.L. 96-517, Patent and Trademark Act Amendments of 1980) "created a uniform patent policy among the many federal agencies that fund research, enabling small businesses and non-profit organizations, including universities, to retain title to inventions made under federally-funded research programs."

Essentially, the federal government by Bayh-Dole gave up its intellectual property rights to research that the taxpayers were funding via federal dollars and gave those IP rights as a gift to academic institutions and private persons -- who then patented the inventions for their own profit against those same taxpayers.

The Bayh-Dole Act has been lauded in many quarters, but a critical assessment by impartial observers indicates that the positive impact of Bayh-Dole has been greatly overstated by its supporters.

As written by Annetete Lin, Sarah Sorscher, Neha Gupta, Ethan Guillen and Krista Cox in a UAEM White Paper on the Proposed Indian Bayh-Dole Analogue:

"While the Bayh-Dole Act of 1980 led to a dramatic increase in patenting and licensing of publicly funded research, there is little evidence that the legislation was necessary for or successful in accomplishing the goals which inspired its drafting. The practice of licensing at universities in the US has raised serious concerns regarding the application of similar legislation in India."

See also As India Mulls Bill Modeled on Bayh-Dole, Critics Claim It May Stifle Innovation.

A more detailed view of American innovation and Bayh-Dole is presented at So AD, Sampat BN, Rai AK, Cook-Deegan R, Reichman JH, et al. 2008 Is Bayh-Dole Good for Developing Countries? Lessons from the US Experience. PLoS Biol 6(10): e262. doi:10.1371/journal.pbio.0060262, found online at
PLoS Biology: Is Bayh-Dole Good for Developing Countries? Lessons from the US Experience
where it is written:

"Throughout the 20th century, American universities were the nation's most powerful vehicles for the diffusion of basic and applied research results [16], which were generally made available in the public domain, where industry and other public sector researchers could use them. These activities were central to the rise of American technological success broadly and to the growth of knowledge-based industries, such as biotechnology and information technology, in particular.

Public sector research institutions also relied on generous public funding for academic research—from a highly diverse group of federal funding agencies—which grew dramatically after the Second World War, and on the availability of venture capital to foster the development of early-stage ideas [6]. These and other unique features of the US research and development system explain much more about innovation in the US after BD [Bayh-Dole] than the rules about patenting that BD addressed.

In the pre-BD era, discoveries emanating from public research were often commercialized without patents, although academic institutions occasionally patented and licensed some of their publicly funded inventions well before BD, and these practices became increasingly common in the 1970s [17]. Since the passage of the Act in 1980, US academic patenting, licensing, and associated revenues have steadily increased. BD accelerated this growth by clarifying ownership rules, by making these activities bureaucratically easier to administer, and by changing norms toward patenting and licensing at universities [6]. As a result, researchers vested with key patents sometimes took advantage of exclusive licenses to start spin-off biotechnology companies. These trends, together with anecdotal accounts of “successful” commercialization, constitute the primary evidence used to support emulating BD in other countries. However, it is a mistake to interpret evidence that patents and licenses have increased as evidence that technology transfer or commercialization of university technology has increased because of BD.

Although universities can and do patent much more in the post-BD era than they did previously, neither overall trends in post-BD patenting and licensing nor individual case studies of commercialized technologies show that BD facilitated technology transfer and commercialization. Empirical research suggests that among the few academic patents and licenses that resulted in commercial products, a significant share (including some of the most prominent revenue generators) could have been effectively transferred by being placed in the public domain or licensed nonexclusively [6,18].

Another motivation for BD-type legislation is to generate licensing revenues for public sector research institutions. In the US, patents are indeed a source of revenues for some universities, but aggregate revenues are small. In 2006, US universities, hospitals, and research institutions derived US$1.85 billion from technology licensing compared to US$43.58 billion from federal, state, and industry funders that same year [19], which accounts for less than 5% of total academic research dollars. Moreover, revenues were highly concentrated at a few successful universities that patented “blockbuster” inventions [20]. [emphasis added by LawPundit]

A recent econometric analysis using data on academic licensing revenues from 1998 to 2002 suggests that, after subtracting the costs of patent management, net revenues earned by US universities from patent licensing were “on average, quite modest” nearly three decades after BD took effect. This study concludes that “universities should form a more realistic perspective of the possible economic returns from patenting and licensing activities” [21]. Similarly, the head of the technology licensing office at MIT (and former President of the Association of University Technology Managers) notes that “the direct economic impact of technology licensing on the universities themselves has been relatively small (a surprise to many who believed that royalties could compensate for declining federal support of research)… [M]ost university licensing offices barely break even” [22].

It is thus misleading to use data about the growth of academic patents, licenses, and licensing revenues as evidence that BD facilitated commercialization in the US. And it is little more than a leap of faith to conclude that similar legislation would automatically promote commercialization and technology transfer in other, very different, socioeconomic contexts.
...

[T]he present impetus for BD-type legislation in developing countries is fueled by overstated and misleading claims about the economic impact of the Act in the US, which may lead developing countries to expect far more than they are likely to receive. Moreover, political capital expended on rules of patent ownership may detract from more important policies to support science and technology, especially the need for public funding of research. Given the low level of public funding for research in many developing countries, for example, the focus on royalty returns at the expense of public goods may be misplaced [61]. "

Today, we are faced with a federal government in the United States that is essentially bankrupt because of the inequality of income and because of reduced taxation for the increasingly smaller percentage of the population who increasingly have more of that income and who increasingly are hoarding more of the nation's wealth, while paying fewer and fewer taxes.

Those same people in America who have the wealth are unwilling to pay the taxes to keep the country afloat.

When we add to that development the fact of legislation such as Bayh-Dole which has been giving away the company store to private persons who now are milking the public for every penny they have through the ill-conceived patent system of the USA, then it is small wonder that the federal government has no money.

You can not give away the "company" assets and hope to survive.

Worse, Bayh-Dole has corrupted universities and unimpeded inquiry by turning them into avenues for private commercialization of taxpayer-funded research directed at private profit objectives. Janet Rae-Dupree at the New York Times in When Academia Puts Profit Ahead of Wonder writes:

"In trying to power the innovation economy, we have turned America’s universities into cutthroat business competitors, zealously guarding the very innovations we so desperately want behind a hopelessly tangled web of patents and royalty licenses."

Crossposted from LawPundit.

Poverty and Income: What is the "Real" Poverty Rate? via Paul Mattessich at Wilder Moments

Paul Mattessich at Wilder Moments
via the Minnesota Twin Cities Daily Planet
discusses What is the "real" poverty rate?,
an important parameter that reflects employment, income, benefits and ownership in America.

Social Capitalism May Just Be the Doctrine of Tomorrow: Navigating the Socio-Economic Future with the Right Navigator

Is "social capitalism" or "sociocapitalism" the new doctrine of the future?

To understand the world, we have to know where we were, where we are, and where we are going.

Many people do not care for history, so they do not know where we were.

Many people are not happy with where we are, and are concerned more with where we should be.

Many people try not to figure out where we are going, because like travelers dependent on GPS, who needs a map when you have a navigator?

For many people, that navigator in their world is their own political, economic and religious belief system, which tells them what to do and where to go.

But what if their navigator is out of date?
What if they have not "downloaded" the most recent update?
What then?

Such in fact may be the case for many people following what are arguably outdated non-updated doctrines in the political, economic and religious sphere.

The modern world has changed and is continuing to change, and the doctrines -- or navigators -- that people follow, surely should be "updated" to match the times, so that people get to where they think they are going and want to be.

A good argument can be made that something called "social capitalism" or "sociocapitalism" is emerging as THE NEW DOCTRINE.

R. Jagannathan in Socio-capitalism set to become the new economic doctrine? writes as follows:

"Socio-capitalism is an idea whose time has come. It may not be easy to define what it embraces, but what it abandons is clear: market and ideological fundamentalism."

If that actually turns out to be true, and there is much evidence that it IS or WILL BE true, then the adherents of fundamentalism in political, economic and religious spheres are following doctrines that are on the wane.

Something else is actually coming, now and in the future.

Today's Young Generation: The Really Hip Socially Responsible Hipster Entrepreneurial Generation: "Generation Sell" and Small Business Enterprise as the Ideal Social Form

Back to the basics?

What is the "really hip" Entrepreneurial Generation?

William Deresiewicz at the New York Times Sunday Review
has a sparkling analysis at Generation Sell

in which he discusses today's young generation and its character
as being marked by "social entrepreneurship"
-- the preferred way to make money responsibly via small businesses.

update:

Capitalism and social conscience combined?
Social capitalism?
Sociocapitalism?

Mortgage Rates Lowest Ever

Diane Tuman at Zillow Blog on History of Mortgage Rates writes:

"We keep hearing that mortgage rates are the lowest in recorded history and it is true. Presently, the 30-year fixed rate on Zillow Mortgage Marketplace is 3.88 percent, the 15-year fixed is 3.35 percent and the 5/1 ARM is 2.81 percent."

Intellectual Property and Freedom of Expression at the Cynical Musician writing on "Jefferson, Copyright and Natural Law"

See an interesting analysis of intellectual property and freedom of expression at Jefferson, Copyright and Natural Law.

I will have to re-read this to see if there is anything that I disagree with, but based on my first reading, it makes a lot of sense.

Wealth Redistribution and the Creation of Income and Wealth Inequalities: The Example of American College Football BCS Commissioners and Large Research University Presidents

How is wealth "redistributed" and how do inequalities in income and wealth arise?

The inexcusable inequality of income and wealth in the United States is exemplified by the situation in American college athletics, where hundreds of thousands of young people as athletes compete for no direct compensation (many of course get scholarships), while a handful of ruling university and related elites pocket big money at the expense of these virtually uncompensated student-athletes.

That is the state of the economy in general. Many work for low wages or none at all while a few of the clever ones profit exorbitantly. It is a situation that must change if America is to achieve badly needed reconstruction and renewal, including a narrowing of the gigantic gap between rich and poor.

In last night's college football game between Rutgers and Louisville, the Cardinals' senior cornerback Anthony Conner unluckily broke his neck when he banged his head on an opponent's knee, but as written by Teresa M. Walker, AP Sports Writer at Yahoo! Rivals.com: "the senior is not paralyzed despite the severity of the injury". It is a freak injury to be sure, but it is the bodies of the young people that are on the line in college athletics - just for fun, mind you. (Joe Pa is an exception)

This is a good time to compare the status of college football players in an allegedly "amateur" sport with that of the salaries of BCS college football conference commissioners in that same "amateur" sport.

For some people, the alleged "amateur" sport of college football is really a very good business to say the least, and that applies particularly to BCS football conference commissioners.

Based on 2009 IRS returns, as written by the Associated Press (AP) at ESPN College Sports in Four BCS commissioners made $1M:

"Four of college football's six powerhouse conferences paid their top executives $1 million or more, an Associated Press analysis of tax records shows, far eclipsing the compensation of most university presidents."

In fact, of the 6 BCS conferences, only one conference commissioner made less than the average salary of the median compensation of university presidents at large research universities, a median compensation of ca. $760,000 in 2008. So dear parents of students and student-athletes, you know where some of those outlandishly high tuition payments are going -- straight into the pockets of the ruling elites.

In our view, no conference commissioner should be paid more than 10 times the annual salary of the lowest paid commission employee, earning a minimum wage. That would put a stop to exploitation by compensation quickly. The world is full of competent people who could be conference commissioners at much lower salaries than currently paid. EVERYONE can be replaced -- easily, and at much lower salaries.

Similarly, no university president should be paid more than 10 times the annual salary of a 40-hour a week janitor at that same institution, where a good argument can be made that the latter is equally important as the former. If lawyers went on strike in New York City it would take quite a long time for that to be felt anywhere. When I was in New York City in the 1970's, however, there was a garbage strike, and the impact was immediate, as the stench made the city unlivable in a short period of time. EVERYONE is important, and sometimes, those less-paid are more important than those who are paid more. It all depends on how WE organize societal rules.

I know of no university where the present president could not be removed and replaced immediately with someone equally or potentially equally competent earning 1/20th less than the salary currently paid. Just hire younger people.

Should you doubt that statement - name ONE university president who is irreplaceable. Indeed, name ONE university president who has done something other than fit himself or herself into an already previously existing university culture and its attendant compensation scheme. That takes talent?

In fact, name ONE university president other than the one at your alma mater. Difficult. It is difficult because these people can be replaced, and indeed, ultimately, ARE replaced. ALL of them. But we have nothing against university execs. WE ALL are fungible. That is the way of the world. Hence, there is no excuse to pay exorbitant salaries that are exploitative of institutions and deplete their resources unjustifiably.

Here is an ad one could place for a university president's position at a much lower salary than currently paid, indeed, at 1/10th the current average:

Job Opening: University President at $76,000 per year. We are looking for a well-educated, bottom-line-focused individual with good references to head our institution and move it dynamically forward. You will represent our interests to the outside world. Social skills are a necessity. Future compensation will be based on individual performance and upon achievement of comparable increases for our entire university staff. Fundraising skills and experience are an asset. Only serious applicants willing to work around the clock for the good of our institution need apply.

Would you get any applicants?
Would you get any competent applicants?

Is the mailbox big enough?

The problem is that people are not paid in these elite positions for their actual personal VALUE to the welfare of any given institution-- they are paid whatever "the position pays" to whomever gets the job. Those are two different things. Salaries by "position" rather than by individual "value" are by nature exploitative of the finances of the institution to the benefit of the recipient, in part because it is not the money of the people who select applicants and make the final contracts. It is not "their'" money, it is "only" university money.

The same holds true for the U.S. economy. Once a certain kind of exploitative compensation scheme becomes the status quo in commercial companies and firms, it tends to continue on in existence, and get even more exploitative as it progresses, whether it is needed or not, and whether it is sensible or not. The result is the inequality of income and wealth we see in the United States today. Again, college sports and especially college football are a prime example of this phenomenon.

Ownership and Rampant Inequality in the American Economy and Unemployment, Corporate Profits, Wages, Income, Wealth, Executive Compensation, Average Hourly Earnings, Social Mobility

Take a look at these economic charts. Does your Congressional representative or candidate KNOW these facts, and if NOT, WHY NOT? And are you thinking of voting for someone who will CORRECT the situation, or make it worse?

As a political CENTRIST, favoring neither the GOP or the Dems, and without any allegiance to ANY political party, we continue to be appalled by the current imbalance in the U.S. economy and the inability of extremist political elements and candidates of Republican and Democratic parties in U.S. politics to recognize the obvious problems and their equally obvious, if painful solutions.

Henry Blodget at LinkedIn has a selection of 4 key charts from the BusinessInsider at
Here Are The Four Charts That Explain What The Protesters Are Angry About.

Actually, the slide show at BusinessInsider has 41 slide show pages, including numerous charts, essentially covering the following parameters:

1. The U.S. Unemployment Rate is at a record high rate, similar to 1980

The first chart shows the civilian unemployment rate (UNRATE) from the U.S. Department of Labor, Bureau of Labor Statistics, which is at a record high level corresponding to that early in the 1980's. This could be a cycle of about 31 years to my cyclical thinking, but there is no need for unemployment to hit as high as 10% (which is about 14 million people):

(image linked from Business Insider)

2. Wages as a Percentage of the Total Economy are at a Record Low

At the same time that unemployment is high, wages are at record lows.

(image linked from Business Insider)

3. Corporate Profits are at a Record High

And now comes the stunner. At the same time that unemployment is at a record high and wages are at a record low, corporate profits -- after taxes, mind you - have shot through the roof.

(image linked from Business Insider)

Based on the above statistic, America should be in great financial shape,
but neither wage-earners nor the government are sharing in the boom --
THEY are broke.

So where is that money going?
corporate investment?
research?
patents?

measures to improve and modernize America????

-- not a chance.

Those profits are going in ever greater amounts to an increasingly smaller elite who are stuffing their private pockets with the NATION's money.


4. Corporate Execs Are Earning Record Amounts by Pilfering Corporations (most all of it quite legally of course, since ill-devised laws, regulations, and inadequate income taxation enable that pilfering)

(image linked from Business Insider)

Should laws fix salary caps for corporate executives, just as in sports?

Definitely.

No CEO should be compensated more than a maximum percentage of an average worker's pay in his company (we suggest 10 times the lowest annual salary paid in any company -- that would eliminate gross income inequality and raise salaries at the lower end of the scale, quickly).

Anything paid above a sensible percentage, such as existed in e.g. 1960, should be regarded as outright thievery, as a plundering of corporate coffers by those sworn to watch over them. Right now corporate governance is a myth. It is everyone for himself, grabbing as much as he or she can.

5. CEO Pay Tripled since 1990 While the Minimum Wage Dropped 10%

(image linked from Business Insider)

Beyond outright thievery, what other term can be applied to corporate officers filling their pockets with company money above and beyond any rational economic basis, other than simple private greed?

Why should the people at the top of corporations be cashing in millions upon millions in salaries and bonuses (for what? - those execs are all fungible), while the basic hourly wage -- adjusted for inflation -- has remained virtually constant the last 50 YEARS. No corporate executive should earn immensely more than what people in his company earn -- earnings should go into company investment in research, new products, new facilities, etc., and not into the pockets of company executives.

(image linked from Business Insider)

6. The Top Pilferers are found in the United States of America, as this chart of Top 0.1% Income Share shows in a comparison to top incomes in Canada, the United Kingdom, France and Japan.

(image linked from Business Insider)

7. Social Mobility has Drawn to a Halt in America

What is the consequence of America permitting the above things to happen?

For one thing, social mobility has become nearly zero. Rich remains rich and poor remains poor, and never the twain shall meet, with little chance of change. Indeed, a downward plunge seems more likely than an upward surge. The American Dream has become a fata morgana -- a mirage.

8. Income Inequality has become Rampant

One result of financial imbalance in America is that the United States now ranks 93rd in world income equality, behind Iran, and barely ahead of Mexico -- not really what the Founding Fathers had in mind nor what people imagine when they call America "the land of opportunity".

That idea of endless opportunity is "a has been". We have a friend here in Europe who travels extensively on business in the good old USA and his opinion is that "life in America is hard".

The top 20% of U.S. citizens own 93% of the financial wealth of the country, the bottom 80% of citizens own 7%, and, if we include things like immovable property, the top 5% of U.S. citizens own 60% of the net worth of the country:

(image linked from Business Insider)

9. Who Owes Who in America? The American Dream for a Small Elite

The prevailing legal, financial, economic and social regulatory system over the years has so much favored the rich and the wealthy in America that all that remains today for middle classes and the poor is DEBT.

Regardless of the contributions made to America over hundreds of years by countless Americans in peace and in war, contributions which MADE, PRESERVED, and SUSTAINED the nation, a small minority of greedy but clever people have managed to corner THE WEALTH of the nation for their own possession.

At the same time they have deployed THE DEBTS of the nation to those not having any wealth. The right column in the graphic below shows that the bottom 90% of the population (who own only about 10% of the nation's wealth), own 73% of the debt:

(image linked from Business Insider)

This is a system totally skewed from top to bottom in favor of small financial elites who enjoy "the American Dream" at the cost of their fellows.


10. Those Who Profit Most From the American System are Paying Fewer and Fewer Taxes

The whole financial situation in America is a scandal. Yet, many ignorant politicians and uninformed voters are attempting to worsen the situation, even though -- for the last 100 years! -- wealth in the top echelons has been steadily increasing and the amount of taxes they pay has been linearly decreasing, as this graphic shows:

(image linked from Business Insider)

If American roads are falling apart and the bridges are falling down, the reason is clear. -The money that is there is being spent for other things. America, for example, is the largest market for LUXURY goods in the world. America's wealth is not being spent to keep America a great country. It is being spent to pamper the luxury wishes and vanity of the rich and the wealthy.

By the way, we have nothing against riches, wealth or property, nor against the accumulation of them. We just think EVERYONE should have them, especially in America.

Attaining that objective is elementary -- you simply have to institute laws and regulations into the existing system that enable those objectives and that prohibit small minorities from hoarding all the goods.

Much higher taxation of energy use, of high income levels, of luxury housing and of luxury products is one way to raise a lot of the money that America needs for reconstruction.

The rich and the wealthy would not greatly suffer from such taxation.

Quite the contrary, when a greater percentage of people have jobs and own their own homes and property, society becomes safer and more livable for everyone. When poverty is rampant, modern society disintegrates and the law of the jungle rules. That is not what the Founding Fathers intended. Just ask U.S. Supreme Court Justice Scalia (a self-proclaimed expert on intentions of the Founding Fathers).

See also:

Government Finance and the Question of Who Owes Whom? Everyone Talks About Government Debt but No One Talks About the Creditors

Laughing All the Way to the Bank - Dwight Garner reviews I.O.U.: Why Everyone Owes Everyone and No One Can Pay - by John Lanchester

Crossposted from LawPundit.

U.S. Economics, Anti-Government Views and Anti-Taxation : "Barbarians in the Grip of an Obscurantist Faith"

"Barbarians in the grip of an obscurantist faith" is a phrase coined by Paul Krugman in his New York Times article A Dark Age of macroeconomics (wonkish) of a couple of years ago.

Read that article to gain an inkling -- perhaps -- of the fact that extremist "vested interest" economics has little to do with economic understanding or reality.

Rather, as Rob Graham writes in one of the comments to that article:

"Knowledge in the feudal age was not meant to improve understanding of the world. It was meant to support the status quo. Its purpose was to make sure that things didn’t change, that those with power remained in power.

Whether such knowledge was in tune with the way the world worked or that knowledge improved the lot of society was not a consideration.

A pity we’ve returned to that time."

We wrote about America and the role of "change" in our previous posting.

Those who wish to keep the status quo of an incredible inequality in America as concerns money, earnings, property and wealth, may view themselves to be Americans, but in fact, that is not the philosophy that made America.

On the contrary, that is the selfish philosophy that historically has led all the great cultures of man's past into decadence and defeat.

When the Bible says that the "meek" shall inherit the Earth, they are not speaking of all the prosperous people in America who are unwilling to properly fund and finance the country which has granted them the life of advantage that they enjoy.

Small Businesses at the U.S. Economy Core

Small Businesses at the Economy’s Core is the title of an online posting at IIP Digital, an arm of the U.S. Department of State. There it is written that the linked article was excerpted from the book Outline of the U.S. Economy, published by the Bureau of International Information Programs.

Since that is government material and because the topic is so important, we reproduce that excerpted article below in full, adding the commentary that all the reactionaries in American politics both on the left and the right should read especially the last paragraph. Unfortunately, much of modern America has become more like the countries that most of the immigrants who fled to America wanted to leave.

"American entrepreneurs remain eager to risk their own savings to start small businesses despite the potential for failure that Schumpeter’s model predicts. The widely published and sometimes embroidered story of American Founding Father Benjamin Franklin was a potent symbol of aspiration and perseverance for generations of Americans, “defining our image of ourselves, shaping our sense of possibility,” says author Peter Baida.

The 15th child of a Boston soap and candle maker, Franklin quit school after two years to work in his brother’s printing business. He learned the printing trade and accounting, became the American colonies’ most noteworthy publisher and inventor, and then played his storied role in the struggle for national independence. Since Franklin’s time, Americans have hailed leading inventors and entrepreneurs as icons of opportunism, from Thomas Edison to Apple’s Steve Jobs.

Millions of entrepreneurs try to create their own versions of success. Government data show that, in 2006, an estimated 650,000 new employer-owned businesses were started up and 565,000 went out of business, out of a total of around six million such businesses nationwide. Similar ratios of births and deaths among small businesses are repeated year after year.

One obvious reason why so many Americans choose this path is the relative ease of starting a business. Professions such as law, medicine, and accounting have stiff licensing requirements. But compared to other Western economies, the United States offers an open road to a would-be business owner. The contrast with some Third World economies is monumental. A study by the Peruvian economist Hernando de Soto found that it took 289 days to open a small garment workshop in Lima, Peru. The absence of a vibrant small-business class is not due to a lack of entrepreneurs, he argued. In 1993, an estimated 150,000 vendors worked the streets of Mexico City, to cite but one example. But these vendors were blocked from becoming full-fledged business owners by many hurdles, de Soto says, including rigid class barriers, laws that discourage property ownership, and bureaucracies intent on preserving the status quo. In the United States, change is a way of life."

Politicians who argue AGAINST change in America simply do not understand the history of their own country. I merely add one proviso to "the rule of change"
-- CHANGE "for the better" is preferable.

Small Business Ownership: SBA Loans at Record High Levels Says You're the Boss Blog at the New York Times

Robb Mandelbaum writes at the You're the Boss Blog, the Small Business Blog at the New York Times, that S.B.A.-Backed Lending Set a Record in 2011, writing:

"The Small Business Administration did record business in 2011, guaranteeing more money in loans to small companies than in any year in its history. But the very smallest businesses, seeking the smallest loans, had more trouble getting an S.B.A. guarantee than in 2010."

When people talk about taxes, they often forget that taxes finance small business enterprises, which are the core of the economy, especially in the United States.

Intellectual Property Law in Substantial Need of Reform Writes Law Professor Jason Mazzone

Law Prof Jason Mazzone in his new book Copyfraud and Other Abuses of Intellectual Property Law (ISBN: 9780804760065), Stanford University Press, argues that Intellectual property law needs reform. Aria Munro writes at eNewsChannels.com that:

"Intellectual property law in the United States is on the verge of breakdown and needs to be reformed, argues law professor Jason Mazzone in his new book....

Read the whole article here.

OWNERSHIP is GOOD but Too Few People Have It

By the way, I am in no way against private property or ownership.
Quite the contrary.
Too few people have it!

The "Magic Dust" of Ownership: Sporting Estates on Sale in the United Kingdom, Large and Small

Caroline McGhie headlines at the Telegraph in Sporting estates are the greatest prize that:

"Every self-respecting billionaire should own their own country estate – it’s the ultimate prestige purchase...."

And, indeed, we have been looking for suitable accomodations.

As McGhie writes:

"What makes the perfect estate? There must be a big country house, a few cottages, outbuildings and land, with the value split roughly half and half between the house and the land. Magic dust is supplied by a spectacular setting."

We love that last sentence about "magic dust". Is that not the elusive substance of dreams? No one buys just "four walls". Ownership means more than that. In the end, it is the "magic dust" that counts.

Currently, we have our eyes on this property, as McGhie writes:

"Some buyers like fast access to London. On the borders of Hertfordshire and Cambridgeshire, 45 minutes by car from the capital, the Kingston Wood Manor Estate is being offered by Savills (020 7016 3780) and Carter Jonas (020 7493 0676) at £8.5-£9 million." [link added]

But if the bankers see it differently, we may have to settle, as McGhie writes, for this one:

"Small can be beautiful, too. At the other end of the country, in Cornwall, nine-bedroom Hamatethy farmhouse, with a pair of cottages, more than 500 acres and fishing rights on the River Camel is priced at £4 million." [link added]

Or perhaps, as McGhie writes:

"As the price of good arable land in England has soared in the past few years, reaching an average £6,000 an acre and performing better than gold, a balance has to be struck. "

Maybe real estate and especially "estate" ownership really ARE "magic dust", the dust of gold in the ownership of overpriced real estate properties.

Architectural Digest App for Dream Kitchens: The (H)app(y) Side of Home Ownership

Mobile Marketer points out that Architectural Digest now lets readers create their dream kitchen via mobile.

That is the (h)app(y) side of home ownership. We should support an economic system that leads to MORE home ownership, rather than less, and we must clamp down on real estate speculation in order to achieve that objective.

Current Home Ownership Drop is the Greatest in America Since the Great Depression : What is the Remedy?

Home ownership by Americans has been an important thing ever since the Homestead Act was passed in the United States during the Presidency of Abraham Lincoln in order to encourage settlement of the American West.

How things have changed.

Les Christie at CNN Money reports in Home ownership sees biggest drop since Great Depression that:

"Thanks to the housing bust there has been a substantial increase in empty homes. The number of vacant housing units jumped an astonishing 43.8% to 15 million (or 11.4% of all housing units) in 2010, up from 10.4 million in 2000."

Aha.
So people are in our modern world now out on the streets
while others hoard and count their real estate speculative gold.

That is a fine pickle that Abraham Lincoln would not have tolerated.

Is that the America that the founders intended?

This deplorable situation has developed because we have permitted a system of residential ownership in which housing is not owned by the people living in that housing but by speculators investing in real estate to make profits at the expense of the exploited residents whose mortgage payments finance the lives of a new breed of landlords whose sole connection to property is the deed of ownership. OWNING no longer carries any responsibility.

That has driven house prices, mortgages and mortgage payments through the roof to a point where normal wage earners can not pay for them.

The price of owning residential housing no longer has anything to do with the actual cost of construction or the objective value of a real estate objects. Rather, a horde of middle-men, bonus recipients, etc., have their hands out to grab a share of the money from the mortgage bearers.

That problem in our view would be simple to remedy by laws which prohibit the ownership of residential properties -- except during the period of sale or resale -- by anyone else other than the people living in them.

To make sure that residential properties are sold at reasonable prices, laws should be passed that people owning unoccupied residential property for longer than prescribed periods should be fined or jailed as social parasites.

That would take care of that problem.

As for the protection of buyers, no one buyer or group of buyers should be able to take out a mortgage requiring annual payments greater than 25% of their sole or combined yearly net incomes.

Such rules would drop the prices of homes (residential houses) to sensible levels quickly and unoccupied houses would disappear from the scene - fast.

People with money should be investing in ideas and industries that profit mankind, not THEY profiting from the fact that their fellow men, wives and children -- who constitute the labor force that provides the goods and services of necessity that they also use -- need a roof over their heads.

Our modern world is in great need of reform, even - or especially - in America.

Thoughts on Ownership by a Nebraska Business Owner

Guest posting of Thoughts on Ownership
by a "Nebraska Business Owner":

"The review of the articles that you cite gave me the initial thought that they come from a “collectivist” or somewhat socialist view of life. My view is that this philosophy as a standard does not work. When one is expected to contribute for the benefit of all first it seems to always come down to “redistribution of wealth” where the incentives and drive for the individual are most always lessened.

How would an inventor do if he knew that first and foremost his work rewards have to be divided amongst the community? He doesn’t obtain “ownership” of whatever he produces? Therefore without control does he really benefit from all of his efforts???

This doesn’t mean that the community doesn’t need to benefit. The inventor’s product provides a good or service that is valuable or the inventor will gain nothing from his work anyway.

Although “ownership” should maybe not be a primary goal in itself, the value of the “strive for ownership” brings the rewards to those that work the hardest either intellectually, physically or to those that take the necessary economic risk. Without the ability to “own” for individual long term benefits or even to “own” the “prestige from accomplishment” it dilutes the incentive to try.

In the real estate world I can relate time and again where a property has tenants that don’t take care of the property, pay rents late, and generally do nothing for the community. However if you sell the property to them as a Lease/Purchase where their rents apply to the future ownership all problems go away. The property is now theirs and they have pride in that “ownership”.

What is the first thing that communist countries do when they start moving toward more of a free market capitalism?  They allow private ownership of homes and little businesses. In some of these countries they had collective farms producing food for the populations.  They quickly found that more food was produced for the market by the new small farmer owned plots than the large collective enterprises. What changed? The concept of “ownership”  and the reward for the work given was individualized.

I am not as familiar with the internet world that you mention and the question whether potential patents and copyright laws need changing. However I don’t think there is a difference. The programmers or innovators need to be compensated for their hard work or brilliance. There needs to be some method to allow a little more time for the developer or the company to reap the rewards so that good quality innovative software and hardware is available that offsets the cost of time and money to develop. In the computer world everything happens so fast that one great product quickly gets copied and improved, sometimes maybe before those people that got it started can gain some needed rewards so they will continue to stimulate their minds for more innovations.

This doesn’t preclude cooperative work. I work in a real estate environment where every other month I attend national marketing sessions for the Society of Exchange Counselors. We have brain storming sessions to improve formulas and generate new ideas that the real estate market is presenting each of us with. We share these ideas freely in this forum which might be considered “Crowd Sourcing” or “freeware” in the computer world. Sometimes everyone develops new ideas with little expectation of immediate gain. Our environment is one of a group of folks who come together regularly and any new ideas are taken freely but with the expectation that when the idea person later has a problem others will “give back”.

It is my opinion that if society has as its goal to devalue or discourage ownership that would be not healthy long term as a policy. We do know that ownership isn’t always good in every situation. The previous USA administrations pushed home ownership so heavily that it led to people being allowed to buy houses with no ability to pay. This was underwritten by Fannymae and Freddymac which now have taxpayer guaranteed bad loans which are a big problem which Wall Street passed on to the world as derivatives. The problem here is that the free market value of ownership was manipulated for political reasons. The free market didn’t cause this problem, government did.

I believe that the concept of “ownership” and its perceived value are very important to the health of a country or economy." 

Owniots and Government in the Financial Credit Crisis: Who Owns and Who Owes Governments?

I was reading Stephen Castle at the New York Times Global Business in Europe Girds for Breakout of More Troubled Financial Firms and the major question in my mind was -- if there is all this government debt out there, then there must be people to whom that debt is owed.

But no one talks about THEM. Now why is that?

Day in and day out the mainstream media is keeping everyone on the edge of their seats with new and ever more scintillating stories about all the governments that are on the verge of bankruptcy because of their huge debt  -- to WHOM?.

So why are all these governments IN DEBT rather than IN THE BLACK?
And why has all this debt been authorized? and why is it a problem?
Who owns the government? and who owes to the government?

If governments had efficient and sufficient systems of taxation, covering all of their expenditures, then there would be no deficits.

That is easy to follow, no?

As a practical matter, however, politicians do not get elected by running on a platform of sufficient taxation, but rather, to get elected, politicians promise their voting constituents lower taxes. It is the oldest political scam and it always works. This says something negative about the intelligence of the voting public but we do not want to spell it out too clearly here.

The result is that available government funds do not cover the costs of government programs that need to be paid for, whether this be military defense, police protection, education, public roads and road construction, public utilities, parks and government real estate, social security, medical care, or whatever.

The same people who are unwilling to pay their fair share of TAXES, on the other hand, are quite willing to loan the government money (via government bonds, U.S. Treasury Certificates and that kind of thing) to pay for the necessary services that THEY themselves use.

In fact, the more money you have, the more the government works for you, because much of what we call government services serve the needs of the HAVES.

The military and police protect what people HAVE. They protect "the system" and those profiting from the system.

Similarly, public schools educate the work force, which goes out and makes profits for the same private corporations who are unwilling to pay their fair share of taxes to finance that education.

For their profit-making professions and businesses, everyone uses the roads and the public infrastructure as if it were a given -- but forget it has to be paid for -- by someone.

Employers also want healthy workers and not people plagued by communicable diseases, etc., so that you have to some measure of national health control, and so forth.

Since the existence of government-financed NEEDS can not be denied, the moneyed elements of society, RATHER than paying their proportional share of sufficient taxes to pay for existing government services, lend that same money to the government, in return for payment of interest.

For moneyed interests, this is the optimal solution. Not only do they not pay taxes, they also accumulate even more money via interest payments.

But WHERE is that interest money to come from, economically seen?

By definition, government taxation is ALREADY too low at the time that money is lent to the government, otherwise they would not have to borrow it. So the debts continue to pile up.

Over the course of years this lending of money to governments reaches its final, inevitable result: the amounts of money owed by governments are simply so much greater than their tax revenues that the books no longer balance.

Those who have money also generally have the political power and thus see to it that legislatures and leaders are elected who reduce THEIR taxation even further.

The burden of paying government bills thus is shifted to the weaker elements of society, who as a consequence have LESS and LESS money until the straw breaks the camels back and they are able to pay nothing. Social unrest results.

There is probably no real solution for this because of the inherent greed of humanity. No matter what people have, they want more, so one can not rely on either their wisdom or prudence to save the day.

Nor has academia been very helpful in imparting new knowledge into the picture. For years, Nobel Prizes have been awarded in economics for a profession that apparently has no real clue. If they did, the world economy would not be in its present allegedly precarious state. Maybe an anti-Economics Nobel Prize should be awarded for "common sense" and the following rule: you profit from society to the degree of your wealth. The more wealth you have, the more you have profited, and the more you should pay into the tax revenue pots. Period. No deductions. Straight proportional taxation on wealth. That will keep the government coffers full.

The logic behind that statement is that by definition, all government-financed programs of society have benefited those the most, who have profited the most, since all of these programs, taken together, make up the system which has allowed some to profit more than others. THEIR burden for government finance should be PROPORTIONATELY comparable to their spoils viz. winnings. That is quite fair.

There is in fact plenty of money out there to pay off government debts, everywhere -- but that is not happening because the people who have the money are unwilling to pay off those debts.

They want THE OTHER GUY to pay.

It is a fantastic financial racket for the upper echelons of society everywhere, but it is a type of Ponzi Scheme with a predictable outcome.

At some point, there is simply no one there to pay the debts except they themselves, the people who HAVE the money.

As a matter of economics, therefore, this means only one thing and that is that the debts are paid off with "funny money", i.e. the money of inflation, or via currency devaluation, either directly or indirectly, openly or surreptitiously.

We do not worry about government debt. We worry about the consequences of this rampant greed of the HAVES, which historically always leads to social unrest, political upheavals and/or revolutions - understandably.

New York City Ownership: Immigrants Dominate Small Business Picture in the Big Apple

You definitely can not be anti-immigrants in New York City.
The Big Apple would die without them.

Alicia Ciccone has the story at The Huffington Post in Immigrants Dominate Small-Business Ownership In NYC.

This is a case where ownership is obviously related to the service industry and where small business "owners" are people doing things that provide "a living" but that do not necessarily translate into big bucks. As Ciccone writes:

"The study [being reported on] reflects the reality that many immigrants operate in industries with low wages and poor working conditions, such as dry cleaning and laundry and taxi and limousine services, which both cited 90 percent immigrant ownership."

My own first thought was the restaurant business. Where would the cuisine of the world's cities -- not just New York City -- be without the spice of life that restaurant variety adds to the landscape, much of it by immigrants.

OWNIOTS 4 : Keeping Found Money: Should You Turn it In to Authorities? If It Is A Larger Sum, YES

Who owns money that one finds?

Barton Deiters of The Grand Rapids Press
has the story at Michigan Live
in Law Talk: When can you keep found money? | MLive.com.

OWNIOTS 3 : Patent Monopolies and Ownership: An Example: SEC Requests Apple for Detailed Information on Nokia Patent Litigation Settlement

Lisa Rapaport at Bloomberg in SEC Asks Apple CFO for Information on Nokia Patent Litigation Settlement writes that:

"The U.S. Securities and Exchange Commission asked Apple Inc. (AAPL)’s Chief Financial Officer Peter Oppenheimer for information on the financial terms of a patent litigation settlement with Nokia Oyj. (NOK1V)"

Read the whole article here.

In our view, it is high time that government authorities started going after this monopolist, who is here raising the defense of "confidential" information for the details of its settlement with Nokia.

Alleging that patent infringement settlements can be treated as "confidential" is an absurd view since they are material to the entire patent field and to who owns what, who is licensed to whom, and who is infringing whom.

NOTHING in this field should be confidential because the rights of all are affected and because patents are not "private civil rights" but rather government granted exceptions to normal rights of use and ownership.

Patents are an artificial protection provided to monopolists (let us not speak here of "inventors", a virtually lost breed) by means of pervasive government interference -- via patent laws and rules, and by their enforcement in the nation's courts -- essentially violating the basic theoretical process of capitalism and the free market system.

The public, who finances the entire massive government mechanism that protects these monopolists, has the right to know what is going on. No hiding behind closed doors should be permitted.

If you are against "big government", take a look at the USPTO, which may be hiring as many as 2000 new patent examiners in the next year pursuant to the new patent reform law. The flow of patent applications is massive and continues to rise, year by year. The factories are empty. People have no jobs. Housing is at a standstill. But everyone has a patent certificate on their wall.

Where are your tax dollars going? Here is one example, the USPTO (United States Patent and Trademark Office) headquarters as of the year 2009:

The James Madison Building in Alexandria, Virginia, one of five buildings housing USPTO headquarters, these being the offices for top USPTO officials (what do they do there?). Photographed on August 11, 2006 by user Coolcaesar (http://en.wikipedia.org/wiki/File:Usptojamesmadisonbuildingsouthside.jpg)

The sign in the photograph prophetically reads "one way": surely meaning more big government in store and not less in intellectual property law, with the gigantic ever-growing agencies profiting from monopolists and monopolies "made in the USA". The real manufacturing industry is found elsewhere, e.g. "made in China", "made in India", "made in Korea" or "made in Vietnam" and that is a major reason why the American economy is in such dire straits.

Rather than "making new products" the major industry of the country has become "patenting new products". I was once said that China was "a paper tiger". That was long ago. America since has become "a paper economy".

OWNIOTS 2 : About the name Owniots™

OWNIOTS 2

About the name Owniots™

I was looking for a word dealing with ownership that had never before been used and by the process of trial and error found OWNIOTS, which fit the bill quite well, giving zero hits on Google on September 30, 2011.

Needless to say, Owniots™ is a trademark of Andis Kaulins as of this day, marking this blog.

If you use the word Owniots for commercial profit, please be aware the we "own" the word, and you could be liable for heavy IP infringement damage payments.

After all, if Apple, Inc. can lodge a monopolistic claim to a common word like apple, then a newly coined word like Owniots is a natural "owning" ;-)

There are only 11 main words in the English language that otherwise end in -iots and the Google spell-checker does not recognize 6 of them. Owniots is the magical twelfth. Who "owns" these words?

• chariots - ox carts were the proto-chariots, followed by horse-drawn "cars" as two-wheelers, which gave rise to the spoked wheel, and then ultimately the bicycle and its motorized comparable, the automobile
• cheviots - are a type of sheep, or its wool or cloth made from it, originating in the region of Northumberland and the Scottish Borders
• compatriots -  "fellow" countrymen, companions or colleagues
• galiots viz. galliots - plural of galiot viz. galliot, a type of sailing ships
• griots - West African bards, storytellers, viz. wandering minstrels
• heriots - rights of a lord to the arms and equipment of his fallen soldiers
• idiots - incompetents, persons exhibiting great folly or stupidity, yahoos
• owniots (new) - supporters of ownership and property rights
• patriots - supporters of the fatherland
• riots - civil disorders by larger, disorganized groups or groupings
• superpatriots - sometimes over-excessive supporters of the fatherland
• symbiots - entities marked by close, symbiotic, often interdependent interactions, as in plant biology

OWNIOTS 1 : Owniots is An Ownership Blog re Modern Concepts of Property and Ownership: Why Own at All?

OWNIOTS 1

An Ownership Blog re Modern Concepts of Property and Ownership

Why Own at All?

Why Owniots?

Take a look at our LawPundit posting on German Pirate Party Wins 15 of 130 Seats in Berlin as Internet Activist Movement to Reform Patent and Copyright Laws in the Digital Age.

The focal idea of this blog is that property ownership in the modern world is in a state of change and turmoil.

We need look only to the avoidable chaos in intellectual property law (copyrights, trademarks, patents) to see that prevailing ownership concepts are outdated and in need of revision.

Ownership affect us all. Not only do we ourselves "own" things, but we are also "owned", by our political parties, by our views, by our religious affiliations, by our weaknesses, etc.

Indeed, how do we properly define "ownership"? And to what degree is ownership a product not only of necessity, but also the desire for control?

We are all Owniots, sometimes to our own(ing) detriment.
How much ownership is healthy?

OWNERSHIP in a world globally under lock and key is the prevailing philosophical principle upon which modern society is based. "Having" and "not having" are fundamental states-of-the-art of the human condition.

Ponder how much of your daily activity is guided by "owning" and "having".

Indeed, who you are is often defined by what you have -- or do not have, and that can be quite widely defined.

See e.g. Wendy Richmond at What do you own?

Some years ago, someone we know bought the first Mercedes Benz automobile with ABS. When asked what ABS was, he said he did not know, but, he said "I have it".

We all need to ponder: what do we own or think we own? how do we own it? why do we own it? and does that owning make sense today and in the future?

We need to re-examine what is PUBLICLY owned, what is INDIVIDUALLY owned, what is SHARED, and how we assign the RIGHTS that attach to ownership and sharing.

An initial positive movement in the direction of more modern ownership by sharing is the Creative Commons, and more like it are sure to come.