defending the right to innovate
Monopoly corrupts. Absolute monopoly corrupts absolutely.
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Of all the arguments for IP, the argument that somehow existing inventions can be diffused more quickly if only someone has a monopoly over them is the one that has the least theoretical or empirical support. But the mere absence of facts is no bar to making the argument. Via Stefano Trento, here is an entire manual devoted to that proposition. To quote "It is well established that intellectual property advances product development because intellectual property provides incentives for R&D, commercialization, and product distribution." This is, of course, not well established, and while it is true that IP provides some incentives and disincentives for R&D, it is almost certainly not true that it provides incentives for commercialization and product distribution.
And your evidence for this strongly-worded proposition re incentives for commercialization and product distribution is . . . ?
Just FYI, here's some reason to think the contrary is true:
Several recent commentators have criticized trends in the patent system by suggesting that the goals of the system can be better achieved through a variety of approaches that avoid or mitigate the monopoly-type impact of property rights. Suggested alternatives include the use of cash rewards, buy-outs, and liability rules, as distinct from property rules. This paper uses the important contributions made by these commentators to reveal shortcomings in any view of the patent system that focuses only on incentives to engage in inventive activity. The paper offers a new view of the patent system that embraces property rights and property rules as core elements of the patent system. According to this view, property treatment is essential for the subsequent commercialization activity that is necessary to get embodiments of nascent inventions into the hands of consumers and for efficiently identifying which inventions are worth the costs of government intervention in the first instance. The recently suggested alternatives fail to address these important goals of the patent system and would actually frustrate them. In addition, the current system already addresses many of the concerns raised by such commentary. The paper reveals how property rights and commercialization motivated the creation of our current patent system and explains many controversial trends in the system, including those that sparked the recent critical commentary, as well as those in other intellectual property regimes such as trademarks.
This Article offers an explanation of the role of intellectual property rights (IPRs) in information-intensive vertical supply relationships. In particular, we explore the connection between stronger property rights and the enhanced viability of independent (versus vertically integrated) input supply firms when contracts are incomplete. We start by modeling a tradeoff between two types of information transfer in buyer-supplier relationships: "synergies," in which joint efforts reveal new applications of existing technology; and "leakage," or disclosure of existing information. We show that property rights in the hands of an independent input supplier can create the potential for greater inter-firm synergy, outweighing the risk of leakage. Greater synergies arise due to the supplier's greater effort to adapt its generalized technology to the specific needs of the buyer. Property rights play a crucial role: they reduce the risk of buyer firm opportunism, in effect raising the cost of the buyer's "outside option" in the event the supplier-buyer contract is terminated. The "residual" nature of property rights as described for example by Hart (1995) makes them more effective in this regard than contracts alone. We extend our basic results to analysis of buyouts and spinoffs, and assay an extensive body of empirical evidence. Broad support is found for our approach, pointing the way to future exploration of the relationship between property rights specifications and the opening up of new contracting horizons.
As it happens, there's actually plenty more along these lines, much of it pointing back to Ed Kitch's foundational prospect theory (Ed Kitch, The Nature and Function of the Patent System, 20 J. L & Econ. 265 (1977)).
[Comment at 12/21/2007 12:50 PM by geoff]
The problem with this is it fails the pizzaright test: would it be a good idea to award exclusive rights to the sale of all pizza in the U.S.? The problem of course is that property rights are by no means the same as monopoly rights. The type of information problems discussed by Arora and Merges are of course endemic in lots of sectors of the economy, and nobody suggests that the solution is to award monopolies. Property rights in ideas exist without IPRs; nobody questions the right to buy or sell ideas, or argues that ideas should be exchanged involuntarily. The idea that awarding someone a monopoly over downstream use of an idea makes the idea more likely to spread is theoretically ludicrous, and Michele and I have quite a bit of evidence in our book that common sense is correct, and monopolies don't lead to the greater spread of ideas.
[Comment at 12/21/2007 07:42 PM by David K. Levine]
Renaming intellectual monopoly to intellectual property was a brilliant move. Who can argue against property rights?
But just calling something a property right does not make it a property right. Intellectual Property is a monopoly privilege, rights going far beyond "ordinary" property rights, and the restoration of capitalism in the market of ideas would go a long way to fixing many of our problems.
[Comment at 12/21/2007 08:32 PM by Kid]
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