Against Intellectual Monopoly

be noted
that PLL circuitry was already widely used to control timing on processor
chips.
    What happened next, according to the Federal Trade Commission (FTC),
is a classic case of a submarine:
    Rambus's anticompetitive scheme involved participating in the work of an industry standard-setting organization, known as JEDEC, without making it known to
JEDEC or to its members that Rambus was actively working to develop, and did
in fact possess, a patent and several pending patent applications that involved specific technologies proposed for and ultimately adopted in the relevant standards.
By concealing this information - in violation of JEDEC's own operating rules and
procedures - and through other bad-faith, deceptive conduct, Rambus purposefully
sought to and did convey to JEDEC the materially false and misleading impression
that it possessed no relevant intellectual property rights. Rambus's anticompetitive
scheme further entailed perfecting its patent rights over these same technologies
and then, once the standards had become widely adopted within the DRAM industry, enforcing such patents worldwide against companies manufacturing memory
products in compliance with the standards.34
    This hijacking of an industry standard is at once very profitable and socially
costly. There are generally many similar designs for computer circuitry, and
compatibility is often more important than the specific implementation. If,
however, an "intellectual property" claim can be made against a standard after it has been implemented, the claimant can free ride on the "network
externality" that arises because it is expensive to switch to a different standard.

    In the end, the FTC charged Rambus with fraud. Although a lower
court found that Rambus did indeed engage in fraudulent behavior, an
appeals court subsequently overturned this decision. It now appears that
all memory-chip makers - and consumers of memory chips - will have to
pay an "intellectual monopoly tax" to Rambus, which contributed little of
substance to the design of the memory chips that are to be taxed.
    An indication of patent abuse is patents that are never used by the patentee
or licensed. Such patents do not represent useful ideas, but are fishing
expeditions, representing the hope that someone else will invest the time
and effort to produce a commercially useful idea sufficiently related to
the original so that royalties can be collected. Indeed, it is estimated that
40 percent to 90 percent of issued patents are not used or licensed by
the patentee. One specific example: in 1991, Minolta was ordered to pay
Honeywell $127.5 million in damages after a court ruled that Minolta had
infringed Honeywell's autofocus camera patent. Yet it was also established
that Honeywell was not actually using the idea.35
The Dilbert Factor
    Monopoly has many costs. Some, like loss of social surplus and rent seeking,
have been extensively studied by economists. A less well-known cost is
that not all innovators and managers are the clever, intelligent individuals
usually assumed in economic theory. In the history of innovation, examples
abound of innovators who, far from maximizing their monopoly profits,
have achieved closer to the minimum.
    One exceptional example of innovators playing with a less than full deck
is that of the Wright brothers. Despite their own rather modest contribution
to the development of the airplane, in 1906, the Wright brothers managed
to obtain a patent covering (in their view) virtually anything resembling an
airplane. The application had been filed much earlier, meaning that between
March 1903 and May 1906 they were capable of building an airplane or
teaching other people how to do it, but they did not. Further, even after the
patent was granted, rather than take advantage of their legal monopoly by
developing, promoting, and selling the airplane, the Wright brothers kept
it under wraps, refusing for a couple of more years to show it to prospective
purchasers. However, while refusing to devote any effort to selling their own
airplane, they did invest an enormous amount of effort in legal actions to
prevent others, such as Glenn Curtiss, from selling airplanes. Fortunately for the history of aviation, the Wright brothers had little legal clout in France,
where airplane development began in earnest about 1907.36

    Another case in point takes place in England, also before the First World
War. At that time, the