Friday, June 01, 2012

Hotelling's Law, Patents and Politics: The Principle of Minimum Differentiation is Stronger Than Ever

One of the major problems that modern -- stupidly drafted -- patent laws present is that they conflict with Hotelling's Law (we quote from the Wikipedia):
"Hotelling's law is an observation in economics that in many markets it is rational for producers to make their products as similar as possible. This is also referred to as the principle of minimum differentiation as well as Hotelling's "linear city model". The observation was made by Harold Hotelling (1895–1973) in the article "Stability in Competition" in Economic Journal in 1929."
One can surely find querulant economists who dispute this law and there are surely exceptions to Hotelling's Law, but Hotelling's core idea is most certainly correct, as the subsequent TV example demonstrates.

Go down to your local megastore and look at all the TV sets, whose almost universal modern minimalist design consists of a large flat screen held by a thin bezel, and, if mounted on a stand, mounted on a simple stand, with predominant colors of black and silver. This is the "middle" of the TV market.

The inherent idea of Harold Hotelling's law (do not confuse with Hotelling's rule) is that the more differentiated you make your products from "the norm", the more you move away from the middle viz. center of consumer interest, thus hurting your chances of sale.

Just imagine consumer buying behavior as a bell curve. The more you move to the left or the righ on the bell curve, the more you limit and reduce your potential market. You can of course also concentrate on "niche" markets, but by and large, big sellers go after the broad masses. For example, I wear a large shoe size and have trouble finding a good selection of shoes in that size at shoe stores, where the mass of shoes are in "average" sizes. Indeed, if shoe stores do have my size, it is always in very basic "sellable" models, nothing fancy. The variety of selection is much greater in the middle sizes.

Politicians are faced with what we view to be a political variant of Hotelling's Law, i.e. the further that any politician removes himself or herself from the center, the more he limits his voter base. Hence, "successful" politicians invariably adopt positions which reflect the majority view of their constituents -- or - they face the prospect of losing elections.

The perfidy of stupidly granted minimalist design patents to monopolists like the Apple company is that patents are not being given for any real invention or discovery at all, but rather, quite the contrary, stupid government agencies like the USPTO and their handmaiden courts and judges are helping smart companies like Apple to lay claim to the middle center market for certain products by giving them patents on patent and design claims that represent nothing more than recognition of Hotelling's Law, i.e. the more minimalistic that designs are, the more they are likely to represent the undifferentiated, simple tastes of the majority of consumers.

Hence, as in the case of the Apple company -- who itself stole its name from the public domain especially because of the broad familiarity of people with the world Apple (why not simply Wozniak-Jobs, Inc.) -- granting design rights to THEM on rectangles with rounded corners, e.g. is idiotic beyond measure -- yet mainstream law is doing this.

Worse, instead of throwing Apple company design claims out the courtroom door as frivolous, courts have been lending a serious ear to claims that competitors for certain products could not use the same product color (black, the simplest design alternative), could not have symmetrical bezel edges (the simplest design alternative), could not place control features in the middle of bezel edges (the simplest design alternative), could not have the same logical number of icons on the display (the simplest design alternative), etc.

Clueless judges have permitted such absurd claims, showing that some form of CLE should be developed for judges (schooled by INTELLIGENT instructors) to get them into the 21st century and to try to get them to develop some understanding for the fact that monopolistic companies -- under the guise of intellectual property law  -- are claiming patent, trademark and copyright rights not to protect those rights, but rather to carve out age-old monopolistic market niches, while denying competitors middle market access in violation of a recognition of Hotelling's Law.

Minimalism and minimum differentiation are economic necessities -- not designs invented by companies like Apple. That is why there are so many similar designs in many other product fields, as we have posted AT LENGTH over the years on this blog.

Crossposted at LawPundit.

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