Intellectual Property Rights: Civil Services Mentor Magazine November 2012

Intellectual Property Rights

Ideas can also belong to the people who conceived them like physical property. These ideas result in popular names for products, books and articles, films, music, processes for manufacturing products and products themselves. There is a tension between the original conceiver of thee idea who wants to earn the maximum incentives for his invention and the desire of the public to have that invention at the lowest possible price at the earliest time. Society feels it neces-sary to provide incentives to the inventors because without such incentives there is not sufficient idealism around for inventions to arise in all fields. A steady flow of inventions is essential for progress and a better quality of life for human beings. At the same time, poor countries have difficulty in paying incentives, which become such more expensive for more recent inventions. There is, therefore, a country for inventions to be copied and made available to the public at low prices. In fact, many of the most important ideas – for example, the mathematics that underlies the modern computer or the theories behind atomic energy or lasers – are not protected by intellectual property. Academics spend considerable energy freely disseminating their research findings. I am pleased when someone uses my ideas on asymmetric information – though I do appreciate them giving me some credit. The growth of the “open source” movement on the Internet shows that not just the most basic ideas, but even products of enormous immediate commercial value can be produced without intellectual property protection. Without intellectual property protection, incentives to engage in certain types of creative endeavors would be weakened. But there are high costs associated with intellectual property. Ideas are the most important input into research, and if intellectual property slows down the ability to use others’ ideas, then scientific and technological progress will suffer. By contrast, an intellectual property regime rewards innovators by creating a temporary monopoly power, allowing them to charge far higher prices than they could if there were competition. In the process, ideas are disseminated and used less than they would be otherwise. The economic rationale for intellectual property is that faster innovation offsets the enormous costs of such inefficiencies. But it has become increasingly clear that excessively strong or badly formulated intellectual property rights may actually impede innovation – and not just by increasing the price of research. Monopolists may have much less incentive to innovate than they would if they had to compete. Modern research has shown that the great economist Joseph Schumpeter was wrong in thinking that competition in innovation leads to a succession of firms. In fact, a monopolist, once established, may be hard to dislodge, as Microsoft has so amply demonstrated.

Indeed, once established, a monopoly can use its market power to squelch competitors, as Microsoft  so amply demonstrated in the case of the Netscape Web browser. Such abuses of market power discourage innovation. Moreover, so-called “patent thickets” – the fear that some advance will tread on preexisting patents, of which the innovator may not even be aware – may also discourage innovation. After the pioneering work of the Wright brothers and the Curtis brothers, overlapping patent claims thwarted the development of the airplane, until the United States government finally forced a patent pool as World War I loomed. Today, many in the computer industry worry that such a patent thicket may impede software development. The creation of any product requires many ideas, and sorting out their relative contribution to the outcome – let alone which ones are really new – can be nearly impossible.