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Intellectual Property = Intellectual Monopoly?
A New Book Says ‘Yes’

By Maria Williams  3/26/2009
 

 

A new book claims that—far from encouraging innovation and supporting new business ventures, as intellectual property (IP) law is supposed to do—patents and copyrights cripple innovation, as well as the economy. In Against Monopoly, from Cambridge University Press, authors David K. Levine and Michele Boldrin, economics professors at Washington University in St. Louis, write, “For centuries, the cause of economic progress has identified with that of free trade. In the decades to come, sustaining economic progress will depend, more and more, on our ability to progressively reduce and eventually eliminate intellectual monopoly.” As far as Levine and Boldrin are concerned, IP is intellectual monopoly, and they would like to eliminate all IP law.

“From a public policy view, we’d ideally like to eliminate patent and copyright laws altogether,” Levine recently told newswise.com. “There’s plenty of protection for inventors and plenty of protection and opportunities to make money for creators. Evidence shows very strongly there are lots of ways to make money without patents and copyright.”

Central to Boldrin and Levine’s worldview is the idea that progress comes not only from competition but also from imitation—in order to improve on what has come before. They argue that “there is no real competition without a certain degree of imitation” and that making technology viable and useful “in a real market environment” requires many experiments with various iterations of products, as well as experiments with manufacturing and marketing. The ideal of a “lone creator” who perfects a product the first time around is a myth, they claim. Curtailing that process of experimentation in the marketplace—which, they believe, is the basic effect of patents and copyrights—effectively, stifles innovation.

No Teeth to the Patent Reform Bill

Boldrin told SHRM Online that he has little hope that the patent reform bill currently before Congress (S. 515 and H.R. 1260) will significantly curb what he calls the “well-grown industry of submarine patents and trolls of all kinds that have been seeking rents from actual innovators [via] the legal system.” According to Boldrin, the bill contains merely “tentative” attempts to fix an “intrinsically poorly designed system.” Still, he supports the proposals now before Congress “because they are easier to implement” than his and Levine’s solutions and “because they help stop the tidal wave of ‘let’s make everything patentable.’ ” Here is a list of reforms Levine and Boldrin believe would truly make a difference:

Introduce tougher standards to stop awarding patents that are obviously ill-considered. (“Whatever it was my business was doing before you were awarded your patent should not be subject to challenge after your patent is issued.”)

Improve and make more transparent the system for challenging patents.

Introduce mandatory licensing, with fees based on estimated research and development costs allowing for failures—especially important in the pharmaceutical industry. (“As the [pharmaceutical] industry is heavily regulated by the government, which is an increasingly important purchaser of drugs, it makes little sense to award firms an unlimited monopoly to charge the government whatever price the taxpayer can bear.”)

Roll back the scope of patents, which has greatly increased in recent years. (“In particular, recognize that software patents are a catastrophe in the making and eliminate them entirely.”)

A World Without Patents or Copyrights

In considering what the world might look like without IP law (or with much less of it), it might be helpful to look first at the record labels and big pharmaceutical companies and their much-publicized wars over IP issues in recent years.

No more record labels? Levine has no sympathy or patience for the argument that copyright laws are necessary to preserve record labels, or even that the laws are necessary to give fair compensation to artists. As he told SHRM Online, he believes that the record labels, “as any other institution made obsolete by technology,” will inevitably disappear, regardless of whether or not copyright law is reformed. The record industry’s obsession with copyright laws, he believes, is simply a sign of its death throes.

Boldrin agrees, adding that the fact that record labels, in their current form, are doomed doesn’t rule out their reinventing themselves by providing other necessary services. “But these will be completely different companies, obviously, even if they may keep the same name,” Boldrin said—“pretty much in the same way that the company now called IBM has the same name of a company that existed 50 years ago but produces completely different things and is differently organized.” Boldrin anticipates “the creation of Internet distribution companies, providing the software and the expertise for musicians to distribute their music independently over the Net and charge or not charge a fee for downloading, filling their sites with advertisement, selling tickets to live concerts and so on.”

Levine disputes the notion that musical artists wouldn’t receive fair compensation for their work without copyright laws. Levine frames the issue as follows: “How are music creators rewarded in a world where they don’t get royalties from either recorded sales or [the video game] ‘Guitar Hero’ sales?” His answer: “Exactly the same way they are in the world we live in, since almost all of those royalties are grabbed by Warner before they get near the artist. Fortunately for artists, publicity in the form of recordings of their music creates enormous demand for their live performances, which is where they make most of their money.” Levine went on to note that only a few mega-rich musicians were concerned about "piracy" and downloading. The rest, he argued, were just concerned about being noticed.

Further, Boldrin and Levine argue that, contrary to popular belief, IP law hasn’t promoted the arts by “protecting” artists. In literature, they say, unprotected books are the ones that have made the biggest cultural contributions, while copyrights have doomed some authors to obscurity. The same effect, they hold, is true for music.

Big Pharma on the ropes? Boldrin and Levine see the big pharmaceutical companies as leviathans, overdue to be slain. But Levine said that to curb the scope and power of “Big Pharma,” dramatically overhauling the patent system wouldn’t suffice. He noted the “maze of government regulation” in addition to patent law that would need to be sliced through. Boldrin further stated that clinical trials, which are mandated by Congress for the public good, should be paid for out of the public purse rather than by the pharmaceutical companies. “Once the clinical trials are ‘outsourced’ and patents are gone, the current version of the mega-pharma no longer makes sense, as the latter is just a rent-seeking machine that produces advertisements and legal weaponry linked to the existence of drug patents,” Boldrin said.

He went on to sketch his vision of “a pharma world without patents” in which many small innovative firms would appear and disappear, “creating one or a few new drugs, selling them to generic producers of drugs for a profit and shutting down operations.” In parallel, he said, large and stable production and distribution companies would produce and distribute generic drugs worldwide “pretty much the same way we currently produce and distribute sodas or ice creams.”

Most other industries, Levine said, wouldn’t need to change as dramatically as the pharmaceutical companies, but overhauling patent law and abolishing copyrights would still have a decided, “very real” effect across the economy. For example, in consumer electronics, Levine noted, “We could look forward to the same kind of robust cutting-edge technology that we see in the computer industry: boxes that will integrate all the world’s entertainment and music and literature in a single box connected to the Internet.” Without copyright law, he said, people could have “all the literature of the entire world at our fingertips everywhere and all the time.” According to Levine, the only obstacle to these “innovations” is “the dead hand of intellectual property.”

For more discussion of IP issues from Levine and Boldrin’s perspective, check out their blog.

Maria Williams is a staff writer for SHRM Online.

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