Intellectual Property Law- more harm than good?

Intellectual Property Law- more harm than good?

June 2, 2017
Walker Weitzel
IP Economics , IP Law

Is intellectual property law bad for innovation?

This is a hotly debated question, and unfortunately like so many questions about the law, the answer is, it depends. I have written extensively on the topic, and I’ll begin by giving a thumbnail sketch of the arguments for and against.

Intellectual Property Law: balancing costs and benefits

Pro IP law

It encourages innovation and art by incentivizing the creators.

Anti IP law

IP law stifles advancement by awarding exclusive rights over ideas to those who can afford to purchase them- in most cases, large corporations.

Why would we need special intellectual property laws?    

Intellectual property needs special protection because unlike tangible property, it is extremely easy to usurp. IP can take an enormous amount of work to create, but it can be readily taken and used by others. Companies can spend vast fortunes on developing technology or drug compounds, for example. Writers can spend years writing a book. However, in these examples and many others, once the work is created, it is almost effortless to copy it. A book, if published to the internet, can be copied at zero cost.

A brief hypothetical

Imagine you have a car racing team. You have spent a fortune and years developing a race car design that is better than all others. It is so much faster that you are virtually guaranteed to win. You have built a small fleet of these cars to take you through the racing season. And when you show up to the first race, the other competitors just take the keys to the spare cars and line them up in the grid to race against you. All of your hard work has culminated in just racing against your own cars. Why did you spend the effort to make them in the first place? You would have been better off just using the old cars that everyone else was using.

Obviously this could never happen in real life because the competitors would not have access to your spare cars. But if the cars were a type of intellectual property, such as next great American novel, they would have access. The only thing protecting your hard work from competitors is copyright law.

If it were legal to copy any written work, a writer’s only incentive to write would be the satisfaction and pride of knowing that they created something. While satisfaction and pride are far from worthless, they are difficult to live off of. If we want writers to write, musicians to compose, artists to draw, and inventors to invent, then we need to give them a reason to do so. This is why we have IP laws: we have to give the creators in the community an incentive to create. In the case of copyright, US law protects an author’s rights to copy, created derivatives, distribute, publicly display, perform, or digitally transmit a work. US patent law protects an owner’s right to exclude others from making, using, selling, offering for sale, or importing the patented invention. These rights eventually expire. We give IP owners what is known as a limited monopoly over their works. A patent owner gets twenty years of rights over her invention, and she is allowed to keep everyone else from “practicing” her invention, as it is known in the business. She can make and sell the invention herself, she can license the rights to others, or she can just sell the patent outright. The law gives her a means of profiting off of the work she put into creating. In exchange, the rest of us get to use this new invention once the patent expires. The world of knowledge is expanded, and the arts and sciences progress.

IP laws were written into the US constitution for the express purpose of promoting “the progress of science and the useful arts.” Without IP laws, the progress of science and the creation of art would be immeasurably slower.

That’s great, but does it actually work in practice?

Again, it depends, but generally it does work in practice. The answer comes down to how much investment it takes to develop the IP versus how easy it is to copy. In some cases, as in pharmaceuticals, the cost to develop can be jaw-dropping. Billions. The cost to copy and produce a drug is extremely low however. This is a case where if the pharma companies did not have exclusive rights over their IP, they could not earn back the investment in developing the compounds. Drugs would stop being developed. You already see this in certain classes of drugs that cannot be readily profited from, like vaccines, where the cost to develop is extremely high compared to the profit potential. The incentive to create new antibiotics is a tough business case too, and governments are considering stepping in to add bounties or awards for developing new drugs. Without the business case, even if there is tremendous social value, corporations cannot innovate.

At the opposite end of the spectrum, patents on software may be serving to slow innovation. Patents were awarded on software at a furious rate in the early part of this century. Often, the actual innovation was minimal, and the resulting monopoly hurt legitimate competition. This is also more of an example of the case law taking a few years to catch up to the state of the technology. The bar for whether software or a business method has been raised with recent court decisions, and we are closer to an equilibrium where the cost to develop is commensurate with the reward of the monopoly.

It is far from a perfect system. No system is perfect. But in general, yes, it does work. IP laws help push the arts and sciences forward.

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