Goodyear and use of a gateway patent to control a big Invention

In Medical Monopoly Joseph Gabriel describes how Charles Goodyear used patents to lock out competitors from using his process for “vulcanizing” rubber without a license. We will use Gabriel’s account to consider alternatives to the prevailing university narrative about how the use of patents is supposed to work in university research.

In 1844 Charles Goodyear obtained his first patent on the process of vulcanization, and Goodyear then licensed the rights to make specific products using his method to individual manufacturers.

So far so good. This is the general idea behind a “good” use of patents, allowing inventors to control the market for the use of their inventions for a limited period time, obtaining a financial benefit as a share of the financial benefit gained by others in a stream of commerce.

Goodyear’s process had significant drawbacks–he had rushed to secure the patent for commercial reasons–and it took another four years of work by Goodyear and a number of other inventors in the field before high-quality vulcanized rubber could be reliably produced.

Here we see an implicit distinction between the inventing that “reduces an invention to practice” to demonstrate that what’s claimed really does work and the inventing, retooling, testing, and training that may subsequently be needed to make from some initial invention a new, broader, invention work in a manufacturing and mass production environment. In a sense, then, there may be an initial or gateway invention, and from that invention might spring a number of other inventions and non-inventions (NIPIA!–non-IP intangible assets) that, taken together, form this broader invention, something that is reliably produceable and useful. We can call this collection of assets the Invention, with a capital I.

The activity to move from a gateway invention to an Invention with the capital letter we might call “development” but we could also call it “evolution” or “lucky chances” or “collaboration.” A gateway invention is an entry point (among others) that starts any of these follow-on activities to arrive at a big Invention–vulcanized rubber, cotton gin, light bulb, gene editing. Getting a patent on a gateway allows the patent holder to control not only the downstream “market” for the invention (lower case) but also to shape the activities of others in the development/evolution/lucky chances/collaboration that might produce one or more big Inventions.

At the same time, Goodyear and his licensees instituted numerous lawsuits against competitors for violating his patent, and by 1848 cartels had begun to form among licensees that used the patent to keep competitors out of the field.

Now the situation gets more interesting. One might think that an inventor might license to everyone and thus obtain royalties or rents from everyone who wants to practice the invention. But in practice things don’t necessarily go that way. Instead, the inventor licenses only some companies and not others, or other companies for whatever reason refuse to take a license–because they think the patent is invalid, or they don’t think they are infringing the patent, or they think that the royalty demanded is too high or the terms are all wrong (such as, say, requiring them to give up trade secrets or license out their own technology or purchase goods or services from the inventor’s licensees). Competitors, if they refused a license, would have to design around the claimed invention, finding a substitute for rubber, or a different way of treating the rubber, and the like. Doing so is not necessarily “progress” or “creative destruction”–it could be just wasted time and effort, delaying the growth of the market and the development of new products based on vulcanized rubber, because that’s what the inventor decides and uses a patent to enforce.

. . . in 1849 Goodyear’s backers convinced him to get his patent reissued in a way that covered innovations in the field that had been made over the past five years; as one critic at the time asked, “How is it then, that a man who claimed so little in 1844, should pretend, in 1849, to so much?” Goodyear and his backers then used the new patent to consolidate control over the rubber market over the course of the next decade.

While a patent may be viewed as an “incentive to invent” new things, we have to understand what may be entailed in such an incentive, in contrast, if not competition with, other “incentives” that people may have to discover or create new things. One might, after all, find in trade secret an incentive to invent, or in fame, or even in making money in a local market, or even pleasing an employer with something new. A patent might provide an inventor, or an inventor’s investors, or anyone who the invention might happen to sell the patent to, with an opportunity to exploit the invention for financial gain. But such a use of a patent surely is not the only way to make money, or always the best way to make money, if making money is to be the guiding star for all such activity.

An “incentive to invent” may then easily also be an “incentive to control a market”–both in terms of who may participate in that market, what companies must pay to participate (if they are allowed to participate) and what they might have to give up (their rights to improvements, trade secrets, control of pricing), and what new technology may enter that market (which may create standards, or require everyone to sell only specified product, or limit competition based on either price or new features). Yet we don’t see much in the way of public arguments that the patent system’s “incentives” were intended by drafters of the Constitution to allow inventors to control markets for beneficial products, but rather to have exclusive rights for limited times to their inventions. The exclusive right to an invention for a limited time, then, might be considered to be the “incentive” and the publication of the invention then would be the public benefit as others may practice the invention without the patent holder’s permission at the expiration of the patent or use the patent to devise ways around the patent before it expires. An inventor, then, seeking to use the patent system might also be motivated to find ways to prevent that public benefit from being realized by filing more patents on improvements (continuation in part), or obtain a broader patent by rewriting claims (reissue), or adding new claims (continuation).

If we were into possible revisions of the patent system, we might consider a “patent holder exhaustion” rule in which a patent holder had only the term of an initial patent in an area of art and any other patents the holder obtained during that term were not enforceable beyond that initial term. A patent holder might exclude others from the use of an invention, but not an Invention. Or, the right to exclude could be joined to an offer of a license on fair, reasonable, non-discriminatory terms. Only those that do not accept a fair offer of a license might be excluded by patent.

If such a rule were in place, for Inventions that might take a long time to develop, patenting gateway inventions and excluding others would be less attractive as a means to control the market for the entire cluster of inventions that would go into the big Invention. Looking at things this way, we might even come to see that for big Inventions requiring much “development” (and whatever else we ought to call it) before they are generally useful, patenting gateway inventions and excluding all others would be a great way to slow down rather than promote progress of the useful arts. A patent holder of an isolated potential gateway invention that refused to license generally to all would limit its own capability to raising the money and finding the talent and gaining access to the technology needed to make a big Invention from the gateway invention–or sell the patent off to a speculator who thought they had a better chance to do these things than did the patent holder (or inventor). In effect, this is the position that most universities running their own patent license programs have chosen as their default.

These university administrators choose to prevent general access to gateway inventions and by doing so delay the development of big Inventions, all the while arguing that it is really difficult to find someone to sell (usually by exclusive license conveying all substantial rights) their patents to. And they are correct–limiting their opportunities so that what they try to do, sincerely and full of claims of public benefit, is next to impossible. The outcome is that most university inventions do not become gateway inventions, even if they have the potential to do so, and when multiple universities invent in common areas, their patent practices then fragment those areas of new technology so that no one, not even speculative investors, can each do all the work themselves to create a big Invention. Eventually either they must cross-license or create standards (and most university exclusive licenses have poison pills to prevent such things). Or they troll industry when companies decide to develop anyway, even if they infringe (and which university exclusive licenses as a general practice does allow). In any of these cases, the end result is a delayed non-exclusive licensing program–and even a short delay in access to new work spells likely ruin for adoption and use with any benefit at all to inventors or early patent holders.

Even if the incentive to monopolize a potential market is attractive to some patent holders, what is the basis for forcing such a thing on inventors as a matter of federal regulation or university policy? We might consider that the Constitution’s authorization for Congress to grant to inventors certain rights relative to their inventions argues for vesting the choices as to whether to use the patent system, and for what purposes, with the inventors, not with their employers, not with universities that don’t even employ faculty for research but rather appoint them and refrain from directing them or overseeing their research work–not employers, though faculty may be called employees for other policy purposes.

If a Constitutional argument isn’t your thing, then perhaps consider the pragmatics of the situation–on what basis does a university administrator come to have a better idea about what might happen with a given invention than anyone else? Do university administrators get special training in the area of art and industry practice in which inventors invent? Do they become omniscient with regard to what inventors know beyond what is described in an invention disclosure? In my experience–twenty very odd years–I have found that university inventors have consistently made good choices with regard to their inventive work, if anyone lets them make choices, which is not the norm these days. Inventors might at times benefit from their university paying patenting costs or pointing out alternatives, but they did not as a matter of policy require administrators to impose the incentive of making money (mostly for the university) or to attempt to control a market for a possible, eventual big Invention. Mostly inventors are sufficient realists that they did not need to seek money from licensing (they generally make more consulting on or teaching about something that everyone wants to use) nor to set up to try to dominate a market for developing a big Invention (doing so generally alienates their research colleagues and makes it even more difficult to see that big Invention get realized).

As a matter of university policy, then, we might argue that inventors should not be forced to accept institutional incentives to invent, or to patent, or to dispose of patents however someone is willing to pay for control of those patents. If anything, a university might deploy a patent policy to prevent putting any incentives in front of inventors, other than that university inventors ought to honor any commitments–implicit or express, formal or informal–that they have made to others regarding access to their research findings. That’s rather different than an insistence on development in the service of mass production motivated by an opportunity to control the market for an eventual big Invention and the suppression of all other research and development in the same area.

A patent may provide an inventor and an inventor’s business partners (if only a university demanding to control rights) with an opportunity to gain from being the sole user of an invention. That’s fine. It comes with the territory, if an inventor chooses to go this route. University inventors, however, ought to consider whether they have made a commitment to public access to their work. Sometimes they have, and sometimes they haven’t. Merely being at a university as a faculty member, post doc, or student does not mean that anything they invent ought to be the university’s, or given over to the public, or sold to a corporation, startup, or speculative investor. No policy can sort through all the details, and a policy that makes an arbitrary decision for convenience is all the worser.

Similarly, using a patent to seek investors to develop a gateway invention into a big Invention with the incentive of potential control of the market for not only the invention, but also the development, and also the applications and improvements and the big Invention drives away collaborators and early adopters of the gateway invention, and as well creates incentives for others (who will not be the exclusive licensee and often do not want to be) to avoid use of the gateway invention, to block its adoption for competitive reasons, and to design around it and so make it obsolete before it ever has a chance to stimulate development to become that big Invention. And design around does not mean that what gets designed is better than the potential gateway invention–it could be poorer technology but have as its attraction that it is free–free of monopoly controls, free of payments, free of audits, free of threats and penalties.

In the reissued patent Goodyear described how a conceptual advance–the application of heat to caoutchouc–was at the heart of his invention rather than the development of any specific manufacturing techniques. In doing so, Goodyear dramatically broadened his claim to include numerous innovations in the field that had been made over the past five years by other inventors, such as the use of steam in vulcanization.

In so doing, Goodyear and his cartels succeeded in controlling the market for vulcanized rubber–not just some methods of vulcanization but the end product as well. The big Invention came about without such control, but once Goodyear had control, then he had not only the gateway invention but also the big Invention as well. That’s nice for Goodyear, but is it the outcome that federal patent policy ought to advantage, especially for research activity supported by federal funds because those petitioning for funds argue that their work is in the public interest? That is, is it in the public interest that research inventions that may be gateways ought to end up like Goodyear’s vulcanized rubber cartels, with pricing, applications, and new technology controlled by patent? More so, is it credible that such a goal is the only or best way by which the public might benefit from potential gateway inventions? No, not hardly. And yet that is where most university administrators and their patent policies have got to.

Yes, there is the “problem” of “development.” Many inventions are not even gateway inventions–they are stuff that comes about because a gateway has already been passed through. Such inventions are improvements, or features, or extensions. Nice. Like flies attracting to mama cow. Only fools would mistake such inventions for potential gateways. And it would take a malicious streak to treat such inventions as if they were potential gateways.

And of those inventions that might become gateways, preventing access and early adoption of such inventions in their little i modes–for research, for DIY, for company internal use that does not require mass production or a commercialization justification–is a sure way to preclude the opportunity that those inventions will become gateways. In the mindset in which control of a big Invention is the goal, it is worth sacrificing many inventions that might become gateways if there is no effort to control future big Inventions in the hope that once a decade, or once every twenty years, some one invention will become not only a gateway but also allow the control of a big Invention as well.


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