*BSD News Article 7322


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From: mcgregor@netcom.com (Scott Mcgregor)
Subject: Re: Patents:  What they are.  What they aren't.  Other factors.
Message-ID: <1992Nov2.205608.8326@netcom.com>
Organization: Netcom - Online Communication Services (408 241-9760 guest)
References: <1992Oct28.153748.3758@murdoch.acc.Virginia.EDU> <1992Oct28.220811.27666@netcom.com> <6581.Nov112.31.0292@virtualnews.nyu.edu>
Date: Mon, 2 Nov 1992 20:56:08 GMT
Lines: 61

In article <6581.Nov112.31.0292@virtualnews.nyu.edu> brnstnd@nyu.edu (D. J. Bernstein) writes:

>The same is true of any research idea. Either it's profitable to market
>the idea, or it isn't. If you see a company marketing the idea, then
>it's obviously profitable.

Unfortunately, in my experience, the profitability of a product (not
the idea)  is hard to predict in advance.  There is an element of
risk. Part of that risk is the number and size of competitors if the
product is successful.  Successful products inspire imitation, they
don't just get imitated because they are accidentally rediscovered by
someone else as apparently happened in Bernstein's case. FSF for
example is intentionally imitating programs from Unix, such as cc, lex
and yacc. They are doing this because these packages are already
proven to be popular.  For profit companies imitate products for
exactly the same reason. Sometimes the imitators win your market and
your investent is lost (Lotus dominates a market pioneered by Visicalc).

Naturally, when you are investor you want to reduce your risk.
Unsuccessful products don't generate competitors. When you lose you
lose alone. But a success might be snatched from you, and you factor
in this risk as well. This risk is highest in "self-revealing"
products, of which software is a good example. A patent is a risk
reduction strategy that may change whether you want to invest or
not--at least until someone else has proven the market and you are in
the position of being the copier. 

Bernstein's claim that if you see a company marketing a product then
you can conclude that the market is profitable. (Well he says idea,
but you really sell products).  Not so, the last company I worked for
is six years old and still hasnt't had a profitable year, even though
it is pretty much the only competitor in its market segment.  There
are other cases where an idea has been around for a while, but not
marketed--then when someone went actively after it turned out to be
quite profitable.  

Lastly, investors don't make investment decisions solely on the size
or profitablity of the market, but on the guestimated  profitability
of an individual new firm in it. The auto industry may be very
profitable, over all, and you might have a nice idea for a better car.
But it would be hard to get money for a new car company to build it
unless you could be assured of a certain market size (perhaps
bolstered by a patent).

>In theory, society gains from a (marketable) patent (which is novel,
>unobvious, etc.) by virtue of its publication;
It might get the former merely by granting a cash reward for
publication or a grant. But patents further reward not merely
publication but practice and commercialization--and I think that is by
intent and not some kind of accident.

-- 

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