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 / Second Quarter 2000 / Issue 19(originally published by Booz & Company)


Jay Walker: The Thought Leader Interview

S+B: There are those, like Harvard Law School Professor Larry Lessig, who argue we are allowing too much patenting, especially of business systems, and that this threatens ultimately to inhibit, not promote, innovation. By way of example, he says the Internet was not built on proprietary technology.

WALKER: Intellectual property has stood the test of time in every business revolution. The burden of proof that this revolution would not benefit from strong intellectual property has to be extraordinarily high. Our society benefited massively in the Agricultural Revolution, the Industrial Revolution, in every revolution prior where underlying technology played a role in protecting inventors for limited periods, in return for them taking risk to create. There is no evidence that I can see that this time, it's different. I'm not saying that patents as existing are a universal, perfect answer. Occasionally the Patent Office makes an error. It grants an overly broad patent, and people license it instead of challenging it, as they should. However, to argue that this time it's different, and that protected intellectual property in the Internet space hinders innovation, is totally wrong, unsupported by any evidence, and self-centered.

S+B: To the untutored eye, there does seem to be a fair share of litigiousness in this space. Amazon has sued to protect what it says is its patent for one-click shopping. You've sued Expedia to protect your pricing system.

WALKER: The patent system self-balances against abuse. The patent owner only benefits by as much economic value as he can extract from his limited monopoly — either by building something himself, and/or by licensing what he has invented to others. If he licenses it and tries to extract a price that's too high, the others immediately ask two questions. First, how do I get around your property? If they can get around it, as in "click twice," they do. Therefore, the economic cost is extremely low, the patent holder gets nothing. If they can't get around it, then they ask: "What is the cost to litigate against it, and perhaps overturn it?" The inventor adjusts the royalty in direct proportion to the quality of the property. Which is why I can't charge you a million dollars for land in Montana, but I can charge you a million dollars for land on Park Avenue.

S+B: Another fear generated by the new rush to patent is that we are inhibiting free inquiry, especially in universities, where the reflex action among faculty and students is no longer to publish or perish, but to patent or perish. At our lunch in Davos, Bill Brody, the president of Johns Hopkins University, said, "Value recognition is driving a stake through the heart of open communication."

WALKER: It's great news that we are now putting a commercial incentive system for innovation in our universities, which had been struggling to find R&D money. As there was never a feedback loop, we couldn't retain our best people in universities. They went to private institutions. And when they were there, we couldn't get them the budgets. What's more, the fears about information dissemination are misplaced. We live in a first-to-invent country. There is nothing stopping you from openly sharing all of your information. You have one year and a day after you disclose it to the public to file a patent. So disclosure loses you nothing.

S+B: It's a full circle. Ideas build businesses, and the business incentive builds more ideas. The idea rules.

WALKER: We are always better off putting in place economic feedback loops that are balanced for the interest of all parties than we are avoiding economics. No great society was built on giving it all away.

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