[Ip-health] NYT in 1886 on bill to eliminate exclusive rights for patents in favor of license of right at 10 percent royalty

[James Love]

In the 19th Century, the New York Times on a number of occasions
reported and editorialized on various proposals at radical reform of
patent laws, including this automatic licensing proposal in 1886.

"PATENT LAW AMENDMENTS."  The New York Times, February 11, 1886.

Representative Dunn, of Arkansas, introduced in the House on Monday a
bill to prevent the establishment of monopolies under the patent laws of
the United States.  Section 4,884 of the Revised Statutes gives the
inventor a complete monopoly of his invention.  It provides that, in
addition to a description of the invention, every patent shall contain
"a grant to the patentee, his heirs or assigns, for the term of
seventeen years, of the exclusive right to make, use and vend the
invention or discovery throughout the United States and the Territories
thereof."  Mr. Dunn's bill amends this section by declaring that the
grant to the inventor shall be, as now, for seventeen years, but instead
of an exclusive and entire property in the invention, it shall cover "a
royalty of 10 per centum of all gross sales of the right to make, use,
and vend the same throughout the United States."  Any person, it is
further provided, shall have the right to make, use, and vend the
patented article upon payment of the 10 per cent royalty to the patentee
or his heirs or assigns.
	The principle of Mr. Dunn's bill is sound and its purpose is
commendable.  It is obvious that some amendment of the bill would be
necessary, for patented inventions vary so widely in respect to their
cost of construction, the extent of the public demand for them, and the
expense of putting them on the market, that a 10 per cent royalty would
in many cases be a very insufficient return to the patentee for his
expenditures of time, labor, money, and brains.  The effect of such a
law would be to discourage invention, and that would be a worse evil
than the tendency to monopoly which the bill aims to check.  The problem
is too complicated to be solved in that simple way, but there is not the
slightest doubt that a just and workable amendment to the patent laws
can be drawn up which would prevent the use of the grants of the Patent
Office as a foundation for greedy and oppressive monopolies.
	It is high time that the interests of the people as against those of
patentees received some consideration and protection.  The spirit of the
time is hostile to monopolies, and justly so.  It is hard enough for the
public to bear the exactions of corporate monopolies which have no other
warrant than a charter granted under State laws and no protection save
that accorded them by bribed legislators and lenient Judges.  But that
the great seal of the United States should be allowed to confer a
license for unlimited extortion is a monstrous wrong.  The doctrine that
a corporation may demand "what the traffic will bear" is held to be
outrageous and wicked.  Yet letters patent of the United States at
present grant to patentees an absolutely unrestricted right to apply
this doctrine to the sale and use of their inventions.  Surely there is
somewhere a just limit to the profit which a patentee may be permitted
to exact from the public under his grant from the Government, a limit
which would yield him the due reward of his genius and insure him a full
and generous return for his toil and outlay, and yet would protect the
people to whom his devices were a necessity from that boundless avarice
which experience has shown is often fostered in the favoring and secure
shelter of a patent.  Such a restriction would not discourage inventors,
and it would have the salutary effect of making useful inventions more
widely available.
	There is one form of extortion under the patent laws, and it is the
most common one which ought to be made impossible.  The best example of
this kind of legalized pillage is furnished by the Bell Telephone
Company.  That company, protected by a patent whose validity is
strenuously disputed, exacts and annual rent of $14 from the local
companies for telephone instruments which cost $3.42.  That is the whole
case in a nutshell of robbery by royalty.  As a consequence of this 350
per cent profit and of its great revenues from the local companies,
whose stock it holds to the face value of $22,000,000, the capital stock
of the Bell Company, according to the statement of Boston newspapers,
has been "watered" to seven times its original amount, and still the
dividends are 17 per cent upon the enormously inflated capital.  No such
monopoly as that ought to exist by the sanction of the Government.
There should be most assuredly a well defined limit to extortion in the
form of rent or royalty upon patented machines and devices.  And the
privilege of exacting royalties is one which should never be accorded
save with reasonable safeguards.  It ought not to be possible for a
patentee to exact his own price with no alternative to the user.  The
latter should have the option of purchase outright in lieu of royalty or
rent paid at stated periods; and the permissible royalty or rent would
naturally become the basis of the purchase price.  A patentee ought to
be content to sell his machine or device at a fair price, and the user
ought to have the right of absolute ownership in it if he chooses to
remunerate the patentee in that way.

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_____________________________
James Love, Knowledge Ecology International (KEI)
http://www.keionline.org, mailto:james.love@keionline.org
voice +1.202.332.2670, fax +1.202.332.2673, US mobile +1.202.361.3040, Geneva mobile +41.76.413.6584