Intellectual property rights are supposed to help inventors bring good things to life, but there’s increasing concern that they may be keeping us from getting the things we need.
In this wild and contested jungle of the law, which concerns things like patents and copyrights, questions about the implications of allowing limited monopolies on ideas are making headlines. Do they stifle innovation? Can they cause the public more harm than good? Trillions of dollars are at stake. Companies known as “patent trolls” are gobbling up patents, then going on lawsuit sprees and extracting fees against infringement. Corporations are using intellectual property law to squash competitors and block our access to things as vital as lifesaving drugs, to place restrictions on things as intimate as parts of the human body. Third World countries are kept from accessing essential public goods related to everything from food security to education.
Surely, the producers of new ideas should be able to profit from their creations. But furious debates over what should be protected and who should profit are calling attention to the many things that are going wrong in this area. For example, a recent front-page story in the New York Times detailed how diabetics are being held hostage in America by companies that follow Apple’s playbook to lock patients into buying expensive, patented products that quickly become obsolete. If you don’t buy the product, you don’t miss getting the new iPhone. You may die.
Intellectual property rights have come under intense scrutiny, a trend on display at a recent conference in Toronto on innovation and society, "Human After All", sponsored by the Institute for New Economist Thinking (INET) and the Centre for International Governance Innovation (CIGI), where I moderated a panel on the topic. Let’s take a look at some of the burning questions and issues in play in this debate.
1. Why Do We Have Intellectual Property Rights?
The notion of giving inventors exclusive rights for a limited time goes back to the medieval era. The first patent in America was granted in 1641 to one Samuel Winslow, who came up with a new way to make salt. Patents could cover both tangible objects and also intangible stuff like methods and ideas. The U.S. Constitution has something to say about patents, namely this:
“The Congress shall have power ... To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries…”
Notice the reasoning: We the People, through our representatives, grant intellectual property rights so that we can move knowledge forward — not enrich a few people at the expense of everyone else.
The question of whether ideas themselves should be protected by patents troubled some of the Founders, who saw the potential for abuse. In an 1813 letter, Thomas Jefferson observed that unlike objects, ideas inherently want to be shared: “He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me.”
Intellectual property rights have expanded quite a bit since Jefferson's day. The Industrial Revolution saw brutal battles over inventions associated with things like the steam engine where the public good was often sacrificed to individual and corporate profits. In the early nineteen twenties, US patent law was revised to favor corporate interests. In 1930, the U.S. began to allow patents for living organisms with the Plant Patent Act. The Motion Picture Association of America, as it emerged, took a hard line on intellectual property and fought for broad protections. As new industries like biotechnology and nanotechnology popped up, companies and individuals sought additional protections for technology. The growth of the Internet set off a yet another wave of intellectual property rights related to patents and copyrights.
Today, what we have is a giant mess, a system plagued by bad actors and bad faith that has often become a means for corporations to smash competition and block human progress rather than advance knowledge. More time and energy is spent by companies coming up with new ways to sue each other than coming up with new ideas (think: Apple v. Samsung). The public purse is picked as taxpayer-funded investments in research are appropriated by profit-making companies. Our patent system fuels inequality by socializing the risk associated with research and discoveries while privatizing the gains. Meanwhile lawyers, as you might expect, are making out like bandits.
2. Patents Have Exploded Since the 1980s.
If you talk to some of the bright-eyed folks in Silicon Valley, America is on an innovation roll. Since the 1980s, the number of patents sought has soared, and the pace is accelerating. Over the last two decades, businesses have increasingly used patents to sue or threaten to sue other companies to get them to pay licensing fees. 2012 was quite a year for patents: the number of court cases increased 29 percent in that year alone, according to PricewaterhouseCoopers. Costs associated with the litigation come to billions per year.
Michele Boldrin and David Levine, authors of Against Intellectual Monopoly, have noted that in a single four-year period, from 1997 to 2001, patent applications leapt by 50 percent. Meanwhile, the number of lawyers working on intellectual property in America went from 5,500 to nearly 22,000.
But are we really getting so much more creative with all these patents? Boldrin and Levine don’t think so. It appears that the number of patents has grown not because there is more innovation, but simply because the number of things that could be patented grew.
As economists William Lazonick and Oner Tulum have pointed out, changes in the law have allowed certain parties, like venture capitalists, to grow rich on patents at the expense of the public. The Bayh-Dole Act of 1980 made it easier for companies, particularly those in biotech, to profit from the results of government-backed research done in universities. Seen an ad for Botox lately? Lazonick and Tulum point out that Botox is a drug whose medical applications were developed in taxpayer-funded universities in the 1960s. In 1983, something known as the Orphan Drug Act allowed companies like Allergan, which got hold of Botox, to commercialize certain kinds of drugs that were developed for use in a small population when additional properties of the drugs were discovered. In 2013, Botox generated $1982 million in revenues for Allergan, of which 54 percent were for therapeutic uses that your doctor prescribes and 46 percent were for the cosmetic uses that the company advertises.
3. Intellectual Property Rights Can Block Innovation.
One of the biggest arguments in favor of robust intellectual property rights is that they are supposed to drive innovation, giving big rewards to those who come up with new ideas. But a growing list of experts, such as Boldrin and Levine, counter that this is nonsense. “Intellectual monopoly is not a cause of innovation,” they write, “but it is rather an unwelcome consequence of it.” They argue that in young, dynamic industries, intellectual monopoly doesn’t play a major role — it’s only when the ideas run out that companies become obsessed with having the government protect the old ways of doing business.
In other words, an explosion in patents could be a sign that a country is getting less innovative, not more.
Boldrin and Levine provide numerous examples in their book of how patents shut down innovation, from a steam engine patent that may have delayed the Industrial Revolution by a couple of decades to the Wright brothers American patent on the airplane which forced innovative work in the industry to move to France.
More recently, Heidi Williams examined work done in the area of human genome sequencing by the Human Genome Project (a public entity) and also by Celera (a private company). Williams concluded that Celera’s intellectual property rights claims resulted in a persistent 20-30 percent reduction in subsequent scientific research and product development.
Economist Petra Moser states that if you look at history, intellectual property laws have always had the potential to squelch progress:
"Overall, the weight of the existing historical evidence suggests that patent policies, which grant strong intellectual property rights to early generations of inventors, may discourage innovation. On the contrary, policies that encourage the diffusion of ideas and modify patent laws to facilitate entry and encourage competition may be an effective mechanism to encourage innovation.”
4. The Public Is Getting Harmed and Cheated.
It’s increasingly clear that taxpayers are getting ripped off, particularly in areas like in pharmaceuticals. Through entities like the National Institutes of Health, the federal government pays for basic research that gets plundered by corporations that make tremendous profits (and then, of course, lobby to have their taxes reduced). Companies like Apple expect the U.S. government to protect their intellectual property rights all over the world, yet they assiduously avoid paying taxes. Considering the fact that iPhones, for example, would not exist without taxpayer-funded research in everything from touchscreen technology to GPS, this is especially maddening.
Battles between companies and sovereign countries are heating up. Eli Lilly and the Canadian government are gearing up for a showdown since the Canadians took away the company’s rights to two popular new drugs, one for attention-deficit disorder and another for psychotic illness. Despite the fact that countries are supposed to have the right to set their own domestic laws for rules of medicine patents, big corporations are increasingly able to get around them and effectively challenge national policy. Free trade pacts have become a prime vehicle for this. The much-debated Trans-Pacific Partnership, a free-trade pact being negotiated between North American and Asian countries and backed by President Obama, has provoked outrage because it would enhance drug company profits by protecting patents on drugs and medical procedures while blocking less expensive generic drugs. The fear is that powerful corporations will blow right past the laws of individual countries and use patents in ways that pose serious human rights questions.
5. Things Don’t Have to Be This Way.
While we certainly want to promote new ideas and to reward creativity, many feel that intellectual property laws aren’t the best way to do this. As Levine has written:
“It is a long and dangerous jump from the assertion that innovators deserve compensation for their efforts to the conclusion that patents and copyrights, that is monopoly, are the best or the only way of providing that reward.”
Several of the economists I spoke to at the INET/CIGI conference, such as Italian economist Giovanni Dosi and Nobel laureate Joseph Stiglitz, have suggested other ways of rewarding inventors, such as prizes. Stiglitz has pointed out that prizes, as opposed to patents, could help reward research that might not be commercially profitable, like developing a cure for AIDs, or other urgent global problems.
Clearly the notion of public benefit has to be vigorously defended in discussions of intellectual property rights. There are many ways the public good get a better deal. The government, for one, could claim rights to revenues for ideas and inventions that were funded with taxpayer money. Or it could force companies like Apple that benefit from such research to pay their share of taxes. So far, the government has not exercised its muscle because there is an imbalance of power between public and private sector.
We need to recognize that science and technology grow by accretion, each new creator building on the works of those who came before. Overprotection blocks exactly what it’s supposed to enhance: ideas that help us live better. The intellectual property system needs to be reevaluated so that social and economic progress aren't hampered by laws that only reward the few, and the public good becomes a top priority.