The other shoe has fallen and Intellectual Ventures, LLC has filed suit against nine companies in three suits:

The secretive firm co-founded by former Microsoft Corp. Chief Technology Officer Nathan Myhrvold has raised $5 billion to amass thousands of patents over the past decade.

Unlike most specialists in the field, Intellectual Ventures has avoided litigation, persuading big tech companies to become investors in his firm—along with payments that sometimes came to hundreds of millions of dollars. But Mr. Myhrvold never ruled out lawsuits if negotiations failed.

But on Wednesday, Mr. Myhrvold’s firm, unable to secure payments from nine companies, announced three patent-infringement suits. One suit names the best-known players in security software—Symantec Corp., McAfee Inc., Trend Micro Inc. and Check Point Software Technologies Ltd.

The suits, all filed in federal court in Delaware, seek unspecified damages. The move comes on the heels of a raft of patent lawsuits among tech firms that has entangled numerous high-profile companies both as defendants and plaintiffs.

IV is a company that makes and sells no products. It is in the business of acquiring patents and licensing them. To a lesser degree it also produces patentable ideas of its own.

In a sane world such a business model wouldn’t be viable and IMO actions of this sort should provoke a revolt against our system of intellectual property. Such a revolt, of course, won’t happen.

For every Symantec or Trend Micro who can afford to fight or pay there are probably ten small companies that will be beaten out of existence, prevented from growing, or discouraged from even starting. About 20 years ago I began to see “hold harmless” clauses relating to intellectual property showing up in the contracts I was receiving with large companies. I can only imagine what they look like now.

File this among the many reasons that our economy isn’t growing fast enough.

Update

Felix Salmon adds this worthwhile observation:

Intellectual Ventures might do a bit of R, but it doesn’t do any D. Instead, it just sits there, extracting rents (that’s the polite way of saying “blackmailing”) technology companies who actually want to make things.

The long term repercussions of this will be a competitive advantage for companies based in places like China or Brazil which have much weaker intellectual property laws. It’s sad, because patents, as originally envisaged, were designed to encourage innovation, rather than to stifle it.

That’s about it.

There’s an ardent, sometimes acrimonious, discussion going on in the comments to this post on the value of higher education at Outside the Beltway. Rather than adding my observations there where they’ll be lost in the din I’ll put them here.

First, to those who cite the statistics on earnings for those with college degrees, I’d suggest a little more caution. When you subtract the relatively small number of those who graduate with medical degrees, those who graduate with law degrees from the top 15 law schools, and a very few others, the expected earnings for somebody with a college degree aren’t a great deal different from those of a high school graduate.

Second, you’ve got to consider opportunity costs as well. Bluntly stated it doesn’t make any sense at all to go into debt to graduate from college as an English major. You’d be far better off getting a job in the trades or with state or local government, e.g. a police officer or firefighter, if you can.

China is graduating about 2 million of its people from college every year. India number of annual graduates is about the same. According to the Census Bureau we’re graduating about 1.5 million people from college annually. Neither China nor India is currently producing enough jobs for its college grads and the pay they’re expecting is a lot lower than that expected by our college grads. My interpretation: if a job requiring a college degree can be off-shored, it will be; if a job requiring a college education can be filled by a foreign graduate, it will be (it’s well documented, for example, that Microsoft pays its H1-B visa holders well below the prevailing wages for those jobs).

A prosperous and secure future takes more than just any old college degree these days. Markets matter and today’s graduates had best pursue a niche that will give them the skills for a lifetime’s worth of different jobs. What is that? I have no idea.

The greater challenge than encouraging more American students to pursue higher education, to get graduate degrees, or to get graduate degrees in science and engineering is getting more American students to graduate from high school. The number of dropouts has remained stubbornly high for decades: roughly 40% of the students in Los Angeles, Chicago, and New York drop out of high school or fail to graduate on time. I can only speculate that they don’t see their high school educations as worthwhile and can’t seem themselves performing work that requires a high school education let alone a college education. I have no idea how to solve this problem and I especially see no way that spending more on education will address it. We already spend more on education in this country than any other country in the world either on a per capita, per student, or total basis. We don’t get enough for our education dollars.

One word on computer software development. There are lots of bright, capable, hardworking software developers who are just scraping by (for one thing, there are lots of bright, capable, hardworking software developers in India). IMO the difference between success and survival is salesmanship. The app stores opened by the companies that sell smartphones has changed that equation somewhat but the entire area is still in its infancy. If it follows the pattern of the past, a handful of today’s app developers will be the core of the software development departments of a few large companies that will eventually dominate the field. Might this time be different? Sure. Will it? Beats me. The odds are against it.

Finally, please don’t lecture me on the value of an engineering degree. I received my post-graduate degree in engineering 40 years ago.

Update

There’s a very timely post at the Chronicle of Higher Education. Richard Vedder and a “small army of researchers”, sifting through a mound of BLS data, have determined something that might be horrifying to some people but doesn’t surprise me at all:

Here it is: approximately 60 percent of the increase in the number of college graduates from 1992 to 2008 worked in jobs that the BLS considers relatively low skilled—occupations where many participants have only high school diplomas and often even less. Only a minority of the increment in our nation’s stock of college graduates is filling jobs historically considered as requiring a bachelor’s degree or more. (We are working to integrate some earlier Edwin Rubenstein data on this topic to give us a more complete picture of this trend).

As a rule I have a mixed opinion of columnist Peggy Noonan’s work. While I think she’s a master rhetorician, I frequently find her analysis problematic. In today’s column at the Wall Street Journal she articulates something I’ve been trying to explain about the dangers that a primary challenge would pose for President Obama far better than I’ve been able to when I’ve raised the subject:

Modern presidents are never challenged from their base, always by the people who didn’t love them going in. You’re not supposed to get a serious primary challenge from the people who loved you. But that’s the talk of what may happen with Mr. Obama.

The Democratic Party is stuck. Their problem is not, as some have said, that they don’t have anyone of sufficient stature to challenge the president. Russ Feingold and Howard Dean have said they aren’t interested, but a challenger can always be found, or can emerge. If anything marks this political age, it’s that anyone can emerge.

The Democrats’ problem is that most of them know that the person who would emerge, who would challenge Mr. Obama from the left, would never, could never, win the 2012 general election. He’d lose badly and take the party with him. Democratic professionals know the mood of the country. Challenging Mr. Obama from the left would mean definitely losing the presidency, as opposed to probably losing the presidency.

There is only one Democrat who could possibly challenge Mr. Obama for the nomination successfully and win the general election, and that is Hillary Clinton. Who insists she doesn’t want to.

What are the Democrats to do? If you are stuck with a president, you try to survive either with him or, individually, in spite of him. Some Democrats will try to bring him back. How? Who knows. But that will be a great Democratic drama of 2011: Saving Obama.

The issue isn’t an either-or binary proposition. In the modern electoral history of the presidency a primary challenge has always caused the incumbent to go down in defeat. That doesn’t require a mass flight. It only requires lower turnout, a change at the margins.

When the margin of victory is just a few points, as it has been for many years, a few discouraged voters who decide to stay home rather than vote for an incumbent they opposed in the primary can make the difference between re-election and going home to organize the construction of your presidential library.

Consider this one-page Morgan Stanley forecast of U. S. economic outlook from Business Insider. It predicts GDP from 2% to 3.9% during 2011, 1.9% to 4.5% in 2012, and 2.1% to 2.9% thereafter with inflation remaining very low for the foreseeable future in all forecasts.

Put me down on the bearish side of the forecasts. I think that we’re unlikely to see growth muchl above 2.5% for some time. Note, especially, that’s Morgan Stanley’s long-term forecast. That is below or barely at the level for job creation to keep pace with the natural increase and far below a level that would send the millions who are currently unemployed back to work.

Does over the period of the next 7 years count as permanent?

I agree with Calculated Risk’s assessment of the one year cut in the payroll tax:

There are two obvious alternatives: 1) Social Security will receive something close to $120 billion less than currently estimated in 2011, and this will negatively impact the long term Social Security projections, and 2) the full amount of the payroll tax will still be credited to Social Security (as if there was no cut), and the 2% cut will come directly from the General Fund in 2011 – so this tax cut will have zero impact on long run Social Security projections.

The second is by far the better alternative. Social Security is already having a cash flow problem (payouts exceed inflows) and, if the system merely foregoes the $120 billion in income, it will bring foreward the date of its actuarial insolvency from the present projection of 2037.

In an op-ed in the Wall Street Journal John Cogan and John Taylor expand on the point they’ve been making over the period of the last two years—the 2009 stimulus package has been ineffective:

The economic data rolling in confirm that recent temporary, targeted stimulus programs have not worked, and that their enactment was a triumph of Keynesian wishful-thinking over practical experience.

As I have said before, I am prepared to believe that a properly constructed, well-timed fiscal stimulus package might indeed stimulate the economy and I’m eager to see the empirical evidence of the effects of the 2009 stimulus package. To date the evidence of effectiveness I’ve seen has come in the form of cranking the inputs through various economic models. That’s not empirical evidence.

Moreover, I’m skeptical that the Congress is capable of producing a properly constructed, well-timed fiscal stimulus package and probably wouldn’t vote for one if it were presented to it.

Is the latest tax proposal an example of a properly constructed, well-timed fiscal stimulus package? Not hardly. As I said on OTB Radio last night, if you’d deliberately set out to construct an ineffective stimulus package it might look something like the proposal that’s on the table. Among the questionable features:

• Focus on the highest income earners
• Short duration of cuts
• Special interest subsidies, e.g. ethanol
• Extending unemployment benefits rather than expanding them

The Congress tends to use the Christmas tree approach to legislation: the more ornaments on the tree, the better it looks. I strongly suspect that what we’ve seen so far is only the tip of the iceberg.

Meanwhile, Ezra Klein has interviewed Moody’s Mark Zandi on the likely effects of the things in the proposal:

“This will make a difference,” he says. “It will add a lot to growth in the first half of next year, when the recovery will be at its most vulnerable. It really seals the deal for the recovery evolving into a self-sustaining economic expansion.”

Other models, like Macroeconomic Adviser’s, rank it lower than that. I can’t help but wonder if the various effects of the increased debt won’t overwhelm whatever modest stimulus effect the proposal might bring.

Yesterday Reuters business and economics columnist Felix Salmon posted the graph above, the “chart of the day”. His conclusion?

If you were structuring a tax code from scratch, it would look nothing like this. But the problem is that tax hikes seem to be politically impossible no matter which party is in power. And since any revamp of the tax code would involve tax hikes somewhere, I fear we’re fiscally doomed.

Or, shorter, we’re screwed.

Although Mr. Salmon’s column includes most of what needs to be said about the graph (you can click on it for a larger image), I think I can add a little. First, note that the total level of federal taxation has remained, except for during periods of booms and bubbles, persistently below 18%. The only times it has ventured above 20% was during the dot-com bubble.

Second, this is not a partisan issue. Federal taxation’s share of the economy has remained in the vicinity of 18% under Democratic administrations and Republican ones, with Republican congressional majorities and Democratic.

Third, the highest income earners are those best able to shield their income and wealth from taxation and the most motivated to do so. As the federal government has become increasingly dependent on these earners and as their share of income has grown, federal tax revenues have grown increasingly vulnerable. Even if we were to eliminate FICA max, the highest wage on which employment taxes are levied, the highest income earners would take less in wages and more in dividends or other forms of income. Were we to raise marginal income tax rates above a certain level, they would move or otherwise shield their income abroad. Americans have shown little willingness to tax wealth; a declining inheritance tax suggests the opposite if anything. It has long been my view that a prime objective of our ruling plutocrats, particularly those in the Senate, has been to prevent such a thing from occurring. Note, for example, that even the farthest left millionaires in the Senate have never proposed a wealth tax.

In a fiscally sound system a ceiling on the federal government’s share of GDP would also impose a ceiling on the federal government’s spending commitments but, alas, that isn’t the case. The burden of proof that a system in which federal revenues as a share of GDP rises markedly is a political possibility is on those who suggest that’s the case. Pointing to a few stray billionaires who take to the op-ed pages of the country’s newspapers to proclaim their willingness to pay higher taxes does not constitute such proof. Were these billionaires and many of the rest of the ultra-rich to pay taxes above what they’re compelled to by law, which there is no barrier to their doing, it would constitute proof. Their urges to others to pay higher taxes while they exploit the tax code to their own benefits is merely proof of hypocrisy not proof of intent.

Cultures are malleable but they are not infinitely malleable, they are not deformable equally in all dimensions, and the propensities of different cultures for the ways in which they will allow change to take place vary. Over the period of the last 70 years the American culture has changed enormously in many ways. We are more egalitarian than we were 70 years ago. We are far more eager to extend federal benefits and to accept them than we were 70 years ago. We are far more predisposed to go into debt than we were 70 years ago. All of that is completely consistent with America’s populist nationalist (Jacksonian) strain of political thought.

We are not willing to allow taxes to rise above a certain level and it looks like that level is below 20%. That’s consistent with Jacksonian thought, too.

I’ve just published a foreign policy-related post at Outside the Beltway:

“How Do You Define “Vital”?”

The latest Wikileaks leak is a list of foreign infrastructure sites deemed vital to U. S. security. It was classified “Secret Noforn” (not to be shown to foreigners).

In a post over at Outside the Beltway, Doug Mataconis nods approvingly at John Kennedy’s speech in Houston in 1960 in which he spoke about his religion as an issue in his presidential campaign. Here’s the speech and here’s the section most frequently quoted:

For contrary to common newspaper usage, I am not the Catholic candidate for President.

I am the Democratic Party’s candidate for President who happens also to be a Catholic.

I do not speak for my church on public matters; and the church does not speak for me. Whatever issue may come before me as President, if I should be elected, on birth control, divorce, censorship, gambling or any other subject, I will make my decision in accordance with these views — in accordance with what my conscience tells me to be in the national interest, and without regard to outside religious pressure or dictates. And no power or threat of punishment could cause me to decide otherwise.

As a contrast I want to draw your attention to Hilaire Belloc’s response to a similar question when he was running for Parliament. Belloc said:

Gentlemen, I am a Catholic. As far as possible, I go to Mass every day. This [taking a rosary out of his pocket] is a rosary. As far as possible, I kneel down and tell these beads every day. If you reject me on account of my religion, I shall thank God that he has spared me the indignity of being your representative.

Although Belloc’s response may strike one as being impolitic he was twice elected to parliament after giving that speech.