Spreading the Wealth

     Most everyone knows that that Microsoft's Bill Gates is a very very rich man.  What has he done to become so rich?  He is the head Microsoft, a company that publishes software that most everyone with a personal computer uses. However, that by itself isn't what has made Bill so rich.  What has allowed Bill to accumulate such wealth is the protection racket that Microsoft has with the US government in the form of copyright and patent laws.  Patents run seventeen years, copyrights longer.  This allows Bill to create a castle around Microsoft's products that cannot be scaled by any opponents.  If you want Bill's stuff, you have to pay Bill.  Which is all fine and good for Bill and the customer at large. The success of Microsoft is related to offering good products at market prices with protection by the government from unwarranted copying.  Basically Bill has become a billionaire through the patent and copyright protections offered by our government.  He and Microsoft also pay a lot of their income as payback for the patent and copyright protection racket government provides.

    Think about if for a moment...  It is literally impossible to come up with anyone of significant wealth who has not gained their wealth without some sort of patent and copyright protection from government.  Movie stars couldn't make their millions if everyone could freely copy their movies and videos, baseball players couldn't make their millions if anyone could use their names and pictures without their permission, Bill Gates couldn't accumulate billions if anyone could copy his company's software without paying for it.  Indeed, even the Microsoft's managers and workers themselves enjoy their prosperity because of the patent protection racket.  However, it is also this patent protection racket that allows for the accumulation of such wealth in the hands of a few.  The question can be asked :

Is it possible to promote a patent and copyright protection system that would allow for a more diverse and vibrant economy?

    What properties should such a patent system have?  First and foremost, any change in patent and copyright protection should only be done according to voluntary choice of those owning the patent and/or copyright.  Secondly, one cannot expect anyone to voluntarily modify their patent protection without some reasonable motive or compensation to do so.  It becomes quickly apparent that such system could be achieved by offering a tax cut on profits from patented goods and services whose term of protection is reduced.  

     In other words, if Joe's Widgets felt his widgets could go without any patent protections, fine, Joe should pay the same tax rate on his widget sales as a burger flipper's whose work is not copyrighted.  If Joe's Widgets decides that it only needs patent protection for 5 years on its latest widget patent, it should be able to get a significant reduction in the taxes paid on profits from selling those widgets.  Assume for the sake of argument and simplicity that the full tax rate for full 17 year patent protection is 37% and the tax rate for burger flippers is 20% -- in other words, there is a 1% tax on profits per year of the 17 year patent protection.   If Joe's Widgets chose a 5 year patent instead of a 17 year patent, his corporate tax rate on widget sales would be 25% instead of 37%.  Of course Joe would have to balance his decision with the fact that in five years, Mary's Widgets, Bob's Widgets, and anyone else could copy Joe's Widgets patent without paying Joe for a license to do so. That is one risk that Joe would have to consider in his choice of a 5 year patent instead of a 10, 15 or 17 year patent.  However, Joe might also have access to Mary's, Bob's and other widget patents if Mary and Bob also choose lower patent terms for lower tax rates.  This would effectively help disperse the creation and accumulation of wealth in more hands instead of possibly allowing Joe, Mary, or Bob to end up with a virtual monopoly due to owning a patent that stifles the rest of the market's diversity and development.

    In addition to promoting a wider distribution of wealth through out the economy, such a patent system would immediately promote an increase in the velocity of technological growth in the market place.  Technological growth would be driven by more by market place considerations rather than the ancient and arbitrary 17 patent system we currently have.  Mary's Widgets could use Joe's expired 5 year patents to improve upon her own widgets and visa versa.  Research and development would be increased because the walls of patent protection would be likely be lowered by the market place consideration of increased urgency for new ideas.  Additionally, one might see a greater willingness of Joe's Widgets to license their patents to Mary's Widgets in exchange for Mary's patents so that both could stay ahead of the rest of the widget market place.  Sorting this all out would be a job for Joe and Mary, their accountants, tax lawyers, research departments and perhaps a good actuary to determine.  The rewards would be worth is for all involved.

    The result of a market driven patent/tax system would be a marketplace that would quickly retool itself to allow for even more rapid growth of technology and wealth rather than the growth rates that we are currently experiencing.  The reward of choosing a shorter patent term would be lower tax rates, lower costs to get products to the market, higher wages for workers because the corporation is paying less taxes, more money in workers hands to buy the lower cost products, etc, etc. This huge reward would of course be balanced by the shorter term of patent protection.  Consider that in today's rapidly advancing technology, for many industries, a 17 year patent is about 16 years too long and current tax rates are way too high. Consider also that exports of US made products and technology have to compete for a market share in global markets where many don't have the high overhead created by our high tax rates.  Such a patent system would help our products and services become even more widely distributed.

     Will we ever see such a profound yet simple adjustment in our tax code?  Who knows.  The debate on this issue has never been heald.  As far as I know, this idea is unique to this remote section of cyberspace.  Feel free to share this idea with your Congresscritter, CEOs and fellow workers to see what they think about it.  That is how snowballs grow in momentum.