Hello Paul, Thanks for the detailed review of my tpog document. Comments below: On Fri, 28 December 2001, "Paul L. Allen" wrote: > TPOG reminds me of the curate's egg: good in parts. It contains flaws > which make me wonder about the validity of its conclusions (not that > the conclusions are necessarily incorrect but that their derivation > cannot be validated). > > For starters you seem to have fallen prey to Marxist belief that value > is conserved in a commodity transaction. You allow for a slight > discrepancy between buyers' and sellers' markets without pondering the > consequences of that. You are not alone in that because the use of > money in transactions obscures facts a little. > > Consider a barter between a sheep farmer and a pig farmer whereby they > exchange a pig and a sheep of roughly equal meat content and which > took roughly equal amounts of labour to rear. According to you this > is an exchange of roughly equal value. Now consider that the sheep > farmer has tried raising pigs but doesn't have the knack of it: he > could raise 10 sheep with the amount of labour that it takes him to > raise one pig. Also, since he eats mutton and lamb every day the sheep > farmer is more than a little bored with sheep and craves the taste of > pork which to him is of much greater value because it is a welcome > change and because it would cost him 10 times as much effort to raise. > The pig farmer is in the mirror position. > > So, far from exchanging goods of approximately equal value, each has > gained immensely by the transaction. Each has obtained something he > prizes in exchange for something that to him is of little value. Each > has profited thereby. The profit may be notional, but if each were to > raise the animal he has difficulty with rather than exchange with each > other the cost of those animals would have been far greater. In this > case, each has expended far less labour to obtain the animal. Everyone in a commodity exchange enters a transaction for their own personal profit, gain, advantage. In your scenario, my concept of "energy being conserved" is absent because you did not mention a free market, an availability of buyers and sellers of sheep and pigs. If such a market existed, and if your premise that pigs and sheep are of approximately equal meat and approximately equal labor to raise them, then a free market would find that hogs and sheep are being bought and sold at approximately the same price. Therefore, your barter between pig and sheep farmer conserves energy. The tpog document could use some clarification in distinguishing the individuals from the transaction itself. > The use of money obscures this fact a little. However, for any item you > can name you will find some people who think that the monetary price > is a bargain and willing to pay much more; you will also find some > people who think that the monetary price is excessive and would not > purchase unless it were half the price. The monetary price of any > item reflects not just its cost of manufacture, distribution and a > profit margin but also what people are willing to pay. Retailers find > that the elasticity of demand allows them to pick a price that > maximizes return. Too low means more sales but these are more than > offset by lower profit. Too high means greater profit but this is > more than offset by reduced sales. Any monetary value attached to an > item is at best an approximation to some statistical mean. > > To consider another aspect. Apples, flour and sugar each have a > specific subjective value to a person. Each person has a different > subjective value which determines whether or not the objective value > asked for those items is one he is prepared to pay. A good cook may > purchase those items and turn them into an apple pie whose value many > people will deem far higher than the cost of the raw goods and the > labour involved simply because his apple pie is far better than those > made by anyone else. In contrast a bad cook can take those > ingredients and turn them into an apple pie that is inedible garbage > that nobody would pay for. > > The idea that value (or "energy" as you call it) is conserved is > false. It is not an objective metric in the first place (what you > treasure I deem trash) and it can be both created (by a good cook) or > destroyed (by a bad one). Any analysis that starts with the > presumption that value is an objective metric which is conserved is > fundamentally flawed. Marxism started out with that premise and the > result was economic collapse of a large empire. What I'm calling energy is objectively measurable as "price on a free market". I'm not concerned with the individual preferences of someone likes to eat mutton and someone else prefers bacon. I'm concerned with the transaction between individuals, not the individuals themselves. In the realm of a Free Market, such a transaction will tend to balance.The individuals may profit or gain by their part in the transaction, but the transaction as a whole, from the perspective of the marketplace, is one that tends towards being balanced. > The next problem is with the history of IP rights. Historically, > trade secrets were all there were and they were not granted by > governments but coined by the simple process of finding a new way of > doing things and keeping it secret. Naturally this applied more > frequently to the processes of manufacturing something than the item > itself. It is difficult to conceal what a bicycle looks like but it > may be possible to conceal the process by which the steel is drawn > into tubes suitable for making the frame. I'm not sure what your specifically disagreeing with here. I agree with this paragraph. > Historically, patents were introduced to *entice* those who > successfully kept secret their trade secrets into revealing them with > a promise of a limited period of protection. It offered them a > gamble. They could keep the trade secret and hope that nobody else > figured out how they did it (a risk because what one man can think of > so can another) or they could reveal the secret in return for guaranteed > protection for a number of years. It was never the intention to make > them a gift, as you claim, since those who had successfully kept trade > secrets for a long time and could reasonably expect to keep them for > much longer still had no need for a "gift" such as that. It was an > offer to gamble. Whether or not a person chose to gamble depended on > his assessment of the risks and the payoffs. A subjective value > decision. Trade Secrets still exist. And for situations where a business believes they can apply them, they would do so. However, I'll disagree with: "those who had successfully kept trade secrets for a long time and could reasonably expect to keep them for much longer still had no need for a "gift" such as that" A Trade Secret would be impossible to apply to a Publicly available consumer item, such as your bicycle. If the idea is for company internal use only, then they would be wise to use Trade Secrets. However, if a company wishes to design a better mousetrap and sell it to the world,then the only way to protect their invention is via a Patent. Same goes for a writer who wishes to sell copies of his book on the open market.Once someone buys a single copy, Trade Secret law would be insufficient to protect the author. The Public did not need Patent and Copyright laws. The manufacturers and authors needed them. It is an enticement, yes. But it was an enticement offered by the Public not because the Public needed it, but because the Public felt that Patents and Copyright could serve the Public Good. > It is debatable if the grant of a patent fits your own definition of a > gift exchange. The purpose of creating a system of patents was indeed > for public benefit since it was hoped that by releasing a trade secret > which one person might never take any further that others would be > able to expand upon it and create new techniques and inventions that > they would not have thought of had the original secret not been revealed. > But the reason a particular individual would decide to apply for a > patent rather than keep something a trade secret is not to benefit the > public but to maximize revenue from that technique or invention. Yes. And your assessment is focused solely on the profit motive, the selfishness, of the individual. Your pig/sheep barter analogy above does the same. Individuals may act for selfish reasons, but that is only half of the transaction. The Public is the other half of that transaction. And the Public allowed the individual the rights of patent/copyright protection because it would serve the Public Good. The natural state of ideas is that they are free and only secrets have protection. Patent and copyrights grant protection to inventions and writings made Public. > It is also my recollection (which I have not checked) that the penalty > for revealing a trade secret applies ONLY to those who gained > knowledge of that trade secret DIRECTLY from the holder of that > secret. I.e., an employee may not reveal his employer's trade secrets > and there are penalties for doing so. Should somebody else stumble > across the idea independently and tell the world about it, that is > without penalty. If you have seen court decisions which say otherwise > then it is my understanding that they are wrong. In tpog.html, section "Trade Secrets", paragraph 4, I say: "Someone operating in Trade Secret law decides to forgo any protections available under patent law. Instead, they choose to maintain a monopoly for as long as no one else can independently create the secret. Once someone else independently discovers the knowledge of the secret, the Trade Secret holder loses any control over the Secret." So, I believe we are in agreement on this point. > Finally, and this is unpardonable, your strong belief that contracts > should apply only to items which are leased for a period of time and that > outright purchases should not have a contract. It is true that many > purchases have no need of a WRITTEN contract. However, the ESSENCE of > contract law is that there is a "mutual exchange of considerations." > The exchange of money for goods IS a contract between two parties even > if there is no accompanying paperwork. It transfers the right of > ownership in exchange for money, for a deed or for any other consideration. > Contract law is quite clear that there must be a mutual exchange of > considerations for contract law to apply. Contract law does not apply to > gifts or to promises because those are unilateral. > > Any exchange of goods for money (or other considerations) may have written > terms and conditions which both parties must agree to. This is not > something that is designed to treat one party unfairly (although it > may be abused that way) but a simple fact of law. In US jurisdiction > in particular, contractual terms may be stricken by a court unless they are > equitable to both parties (UK law is less particular about this and is > concerned primarily with whether or not both parties understood the terms to > mean the same things and were fully cognizant of their implications). > A properly-drawn contract PROTECTS people from the other party to the > contract defaulting in some way on that which they should have > delivered. The tpog document uses poor wording, "Contracts", paragraph 5: "In short, contracts are used when you pay for something over time (loans) or when you agree to buy/sell service for a period of time (your job, your cell phone service)." Saying contracts "are used" did not intend to mean they "are ONLY used". However, the wording could be much more clear.I'll attempt to fix the document and re-release it soon. You might enter a contract to purchase something expensive and important, etc,and it might not involve a duration of time. You might own the item free and clear, and the contract is used to simply explicitely state all terms of the transaction. The focus of the document, however, is to point out that most sales of goods are simple transactions without a contract. When you buy a bicycle, you usually don't enter into a contract, you simply pay your money and take the bike. This in contrast to software sales where you pay your money, take the software, and open it at home to find you've entered into a contract after teh fact. I believe that software should be treated as any other product for point of sales transactions. If you buy the product free and clear, you should not enter into a contract to do so. Most software contracts go above and beyond copyright and patent protection and attempt to apply Trade Secret levels of protection to a device available for Public sale. I believe that shrink wrap contracts trivialize the intent of aggreement before entering a contract, and trivialize contracts as a whole. And I believe that contracts should not be entered into for every purchase, for every transaction under the sun. Nor do I believe that contracts should be allowed for mass consumer products available for purchase to the wide Public, and used in such a way as to remove the benefits to the Public Good that were create by Patent and Copyright law. Patent and Copyright law were created with a balance in mind, balancing the individual inventor's incentive with the Public Good. Shrink wrap contracts throw this out the window. Greg