From: mcgregor@netcom.com (Scott Mcgregor)
Subject: Re: Letter asking for help with Apple from the US VP
Date: Tue, 29 Sep 92 05:27:09 GMT
Organization: Netcom - Online Communication Services (408 241-9760 guest)

In article <29581.Sep2900.20.3792@virtualnews.nyu.edu> brnstnd@nyu.edu (D. J. Bernstein) writes:

>In 1984, Miller and Wegman at IBM invented a compression algorithm often
>called MW2. At the same time, independently, Welch at Unisys invented a
>compression algorithm often called LZW. Both IBM and Unisys filed for,
>and received, patents. Surprise: MW2 and LZW are the same algorithm.
>Explain how innovation was encouraged here.

Hypothesis: Miller, Wegmen and Welch were all employed at for profit
companies who paid them to research in computer science in the hopes
of developing algorithms that would solve commercially remunerative
problems. Each company hoped that by developing such solutions they
would be able to produce products, or license basic technology to
other product producers and thus earn revenues allowing it to recoup
its development expenses and hopefully to contribute profits to its
owners. These company's may have chosen to focus efforts on areas in
which patents are possible in the hopes of obtaining a better
commercial position than would be possible if they instead just made a
copy of some other popular commodity product.  

If the above hypothesis is correct, innovation is encouraged in the
following respects: IBM and Unisys may be able to command better
revenues for developing new products than for merely copying existing
ones, due to the limited monopolies that patents grant. Their
investors (i.e. the purchasers of IBM and Unisys stock) are willing to
allow the companies to fund speculative work for the possible higher
rewards. Thus funders are incented to bring funding to new
development, companies are incented to do that development, and the
resultant new products and processes are made widely available to the
general public through their creators and licensees.

Now, I have no evidence to PROVE this hypothesis.  Indeed, I can't
think of what would constitute proof. But neither can I see how any
evidence presented by Bernstein or others disproves this hypothesis
that companys are incented to do new development by the potential
value of patent rights, and their investors are willing to allow them
because of the potential for higher returns. That constitues a valid
explanation of how innovation might be encouraged by patents that is
consistant with Bernstein's description of the facts. 

This is also true in the Storer/Bernstein case. What may be different
in that case is that we know that IBM and Unisys were motivated by the
possibile advantages of developing products in a patentable area
(after all, they also paid the costs to secure patents. We can also
conclude the same for Mr. Storer. We don't know if Bernstein or
Harspool would have been so incented from the facts presented.  Maybe
they have other motivations.  Maybe they are more philanthropic than
for profit companies like IBM and Unisys.  So they may not be
motivated to innovation by patents.  But this not proof that they
others weren't motivated by the advantages of a patent.

Rather than demonstrating no incentive for innovation, I think the
question that Bernstein raises is whether such incentive is necessary.
He suggests that because there were multiple inventors it shows that
we have too much incentive, or maybe that no incentive was necessary
at all. And, because he can speak for his own motivation, we can
probably believe him that he would have worked on the compression
algorithm he invented even if patents had not been possible. But would
Mr. Storer and Mr. Horspool done so? More imporantly, would IBM and
Unisys have done so? Might we still not have LZW if there were not
sufficient incentives for commercialization.

Lastly, Bernstein's view seems to stop at the act of innovation alone,
not is widespread use by the general public.  Mr. Storer has an
incentive to commercialize his invention.  Would it be so widely known
if Mr. Bernstein had invented it? Clearly IBM and Unisys are in a
better position to provide an innovative new product to a large market
than an individual like Mr. Bernstein.   Perhaps LZW would be widely
used only by "hobbyists" and a "hacker elite" rather than being in use
in many commercial modems and disk drive compression systems.  There
are hundreds of valuable freeware, and shareware products in use by
many readers that share this fate. Meanwhile the commercial incentives
at work incent company's like Lotus, Microsoft, IBM and Unisys to sell
many times more copies of 1-2-3, DOS, etc. and a larger public benefits.

>Seems to me the public loses out. And we're just talking about one tiny
>field of programming here: non-statistical LZ78-like compression. How
>many examples are there in other fields?

The extent that the public loses out is that it has less competition
for certain new products, and can't legally re-engineer their own
solution from scratch.  The latter disadvantage applies to a small
part of the general public--only those with the knowledge, time and
motivation to build their own solution.   The former is a rejection of
the principle of the patent system per se, which causes the public to
pay a cost (the result of the limited monopoly) which is supposed to
be more than balanced by the general benefit (the EARLIER, and WIDER
SPREAD of innovation). Whether this inequation is correct may be true
or false in both specific and general cases, and may be limited to a
matter of opinion based upon person values.


-- 

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


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