From: mcgregor@netcom.com (Scott Mcgregor)
Subject: Re: Patents:  What they are.  What they aren't.  Other factors.
Organization: Netcom - Online Communication Services (408 241-9760 guest)
Distribution: usa
Date: Tue, 13 Oct 1992 04:43:53 GMT

In article <RLK.92Oct12172516@underprize.think.com> rlk@underprize.think.com (Robert Krawitz) writes:

>I don't believe that the clearinghouse scenario you propose would ever
>get off the ground in the form you suggest.  

Definately, this is hypothetical, but then so are the hypothetical
variations on the patent law that are under discussion here.  Probably
none of these things will occur exactly as speculated on here, but may
occur with various improvements or changes.  But things might be
close, and I suspect the same thing is true for clearing house
scenarios.

>In this case, are you
>saying that ATT (say) would keep *no* technical secrets from
>clearinghouse members? 
Anything that AT&T (or anyone else wants to keep SECRET it can. But
then it doesn't count toward the extra royalties that they might
claim. Also, they can't keep it secret AND cover it by a patent, since
a patent explictly publicizes it.  

> It's hard to see what ATT would hope to gain
>from being that open. 

A lower cost way of licensing than case by case licensing.

> Similarly, I really don't think that big
>companies would be happy to see people writing freeware using their
>patents without paying them anything -- it still cuts into their sales,
>whether or not the author is making a penny off the deal.

Company's might not be happy about this, but they can't do much to
stop it now either.  The other benefits (lower cost licensing, more
royalties from paying companies) might be worth it.  The problem with
freeware distributors is that it costs a lot of money to get an
injunction and you won't be able to collect much because freeware
distributors don't have much and it is hard to prove how much they cut
into sales.  Indeed in many cases, when people are offered the choice
of paying to keep what they have or lose it entirely, they choose the
latter, which suggests that there wasn't really a sale there to be
lost. So recoverable damages may not cover the costs of the suit and
the suit will never be filed. In addition, big companies that don't
like this have to worry about anti-trust suits if they are too harsh
on smaller competitors.  It happened to AT&T and to IBM, and they both
have established policies that make it relatively easy for competitors
to license many of their technologies at low royalty rates as a
result.  Not liking it isn't the issue--the question is one of the
economic benefit to the company. Here you have to look at a number of
factors, the reduced cost of licensing, the increased opportunity for
royalties, the lower average royalty figure, competitive forces,
anti-trust issues, recoverable costs in law suits, etc.  If on the
whole the clearinghouse scenario maximizes profits relative to
individual licensing, then large companies will support it even if his
has some drawbacks.  Indeed this is precisely what has lead to
clearinghouses (patent, copyright, and trade secrets) in other
industries.

-- 

Scott L. McGregor		mcgregor@netcom.com
President			tel: 408-985-1824
Prescient Software, Inc.	fax: 408-985-1936
3494 Yuba Avenue
San Jose, CA 95117-2967



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