Arnold Kling  

Against Intellectual Property

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David K. Levine and Michele Boldrin write,

Is intellectual property needed as a shield for the weak against the strong? Those of us who have yet to make our name in the media markets should fear obscurity rather than piracy. Nor is intellectual property protection against merciless corporations. Rather, it is a tool these corporations use against the small.

They argue that the patent system does not serve broad interests. Instead, it serves the interests of those who play the patent game well, which usually means large firms.

There are many cases in which I oppose intellectual property--business process patents, for example. In other cases, I would only oppose intellectual property if I were convinced that a better substitute would emerge. For example, with pharmaceuticals, testing a molecule for safety and effectiveness is really hard. Copying that molecule is really easy. If we want pharmaceutical innovation without intellectual property protection, we would need a different system, such as prizes for drug discovery.

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COMMENTS (11 to date)
agnostic writes:

"They argue that the patent system does not serve broad interests."

Just look around at all the wonderful new stuff we have in 2009 compared to 1909. The really dazzling stuff was invented almost entirely within one monopolistic firm -- Bell Labs.

You may be contrasting invention (nothing else like it) with innovation (making what we have even better), but I think most people want more invention and less fine-tuning of existing stuff.

I don't want a somewhat faster or safer car -- I want a hoverboard!

Indeed, take any big case you want to of Schumpeterian creative destruction -- typically happened because a gigantic firm, or small group of firms, with lots of IP protection wiped another another. To launch a napalm offensive on the status quo, you have to be pretty strong.

A lone tinkerer who is freely parasitized is going to have much more trouble overthrowing the existing order.

David P writes:

Right now when you get a drug approved with the FDA, you have to give the process of production along with the drug to get approved. Without drug patents, firms would still be able to keep the process a trade secret and even if the process is easy to replicate, the first firm to market will get all of the profits while other firms try to catch up.

Joe writes:

99% of pharmaceutical production processes would be re engineered in a week.

Nathan Smith writes:

Here's an idea I'd like to see someone develop:


Assume for the sake of argument that sometimes the economy is sluggish and the government needs to use fiscal policy to get demand moving. I'm not greatly sympathetic to that notion but it's obviously an influential one and there might be something to it. What's the best way to do it?

I think a strong candidate is that the government should start buying out a lot of intellectual property rights, to books, music, drugs, gizmos, clothing designs, movies, etc. It then retires them and puts them into the public domain. It could do so by means of patent auctions, wherein investors and firms bid to control various patents and copyrights. When the auction is finished, the government buys out the IP item at the price the highest bidder would have paid, with 50% probability; otherwise the high bidder buys the IP, and that gives them an incentive to bid in a way that's informative. (How to do this with the consent of patent- and copyright-holders, without handing out big rents to them, is admittedly a tricky auction design problem, but assume that it can be solved without too much waste/rent-seeking/excess payouts.)

This would have multiple stimulative effects. First, the former patent- and copyright-holders get a bunch of cash in hand. Second, entrepreneurs can develop new business plans around the new public domain IP, e.g., manufacturing generic drugs. Third, the elimination of various royalty markups causes some prices to fall, giving the Fed room to pump up the money supply without inflation.

More generally, basic micro theory at least plausibly suggests that the policy yields net benefits IN THE LONG RUN. As opposed to, say, Cash for Clunkers, which obviously and directly makes us poorer in the long run-- the clunkers, valuable assets, get destroyed, and people get a lot of cars that are worth less to them than what they pay for them and presumably than what they cost to produce-- and which, if people have rational expectations, should make everybody spend less as they anticipate smaller lifetime incomes and save for a poorer future. Theory suggests that patent buyouts could improve the economy's long-run productivity, and consumers who anticipate this might be more inclined to open their wallets.

I wouldn't recommend it now: we need a War on Spending like the War on Terror if we're going to keep the republic solvent. Spend more = bad, cut spending = good, that's the motto. But I wish the idea had been out there 12 months ago.

Marcus writes:

I don't know about pharmaceuticals but I've been a professional software engineer for 25 years now and have some thoughts on software patents.

First of all, software patents only started to become a major issue in the last 10 or so years. So we have real world data on how innovative the industry was before and after software patents. I personally believe the industry was more innovative before software patents.

Second, if software patents accomplished what they claim to, then shouldn't software patents be the number one resource programmers turn to for new ideas? But they're not. Software patents are actually written by lawyers for lawyers.

Which gets us to the real purpose of software patents. They are the means by which lawyers came in and took over the industry. Before, there was a thriving industry with little need for lawyers. Now, nothing can be developed without them.

Copyright was always sufficient protection for software.

Mike Kenny writes:

Maybe some reduction in new drug production would be good. Aren't a lot of drugs of dubious value? Here's a post from OB showing assessments of the value of many medical treatments, a large portion of unknown efficacy.

Jesse Rouse writes:

In their paper "Against Intellectual Monopoly" the authors first model is that of the music industry. They show that even something that is easy to copy and distribute as mp3s will still earn the innovator a positive price. Innovation still happens however we no longer have the dead weight loss of monopoly.

malavel writes:

A possible solution for FDA approved drugs would be to force copy cats to share the testing costs with the original company. And to compensate for drugs that fail and for other costs you could increase the testing costs with some multiple.

Bruce G Charlton writes:

This is a very important issue IMHO - since I think that breakthroughs (creative destruction events) are probably what drives modernity.

In Farewell to Alms, Greg Clark argues that the technological breakthroughs that made the industrial revolution were driven by intrinsic drives of creative and able people - and not by institutions or incentives.

Terence Kealey has argued - - that the main motivation for science is to seek prestige within 'invisible colleges' of other scientists; and that the benefits (including economic benefits) of science occur precisely because the originators are happy to give them away - or at least fail to extract full economic value from them.

Because if inventors did extract _full_ economic vlaue from their inventions, there would be virtually zero productivity gains.

Maybe what is needed for creativity is that naturally creative and able people simply are _allowed_ to be creative. Maybe that is incentive enough.

But at present, inadvertently, creative and smart people are being educationally filtered and kept away from situations where they might make a difference.

If our society depends on breakthroughs then this will stop modernity in its tracks (if something else doesn't get there first).

mark writes:

On the idea of prizes for drug discovery, it is interesting to compare the prize sharing strategy the winning team used to build the network to find the 10 red balloons launched by DARPA, which strategy is described at Marginal Revolution today.

"If we want pharmaceutical innovation without intellectual property protection, we would need a different system, such as prizes for drug discovery."

The idea of the state taxing people to fund state-granted "prizes" for innovation is of course the next logical step for those who support state-granted IP monopoly rights. See my posts Patents and Utilitarian Thinking Redux: Stiglitz on using Prizes to Stimulate Innovation and Libertarian Favors $80 Billion Annual Tax-Funded "Medical Innovation Prize Fund". The prize idea makes most libertarians and free market economists recoil but it's not ethically worse than IP.

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