The patent system: End it, don't mend it

It is common to argue that intellectual property (IP) in the form of copyrights and patents is crucial for the creation of innovative ideas and inventions such as machines, drugs, software, books, and music. Proponents argue that IP is just like ordinary property in houses and cars. In fact, empirical evidence shows that IP does not promote innovation and that, unlike ordinary property, it is detrimental to the social good.

What does the Constitution say?

Contrary to popular myth, the US Constitution does not provide authors or inventors with special rights: It merely gives Congress the option of "securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries." The purpose of granting such private monopolies is solely to "promote the progress of science and useful arts."

Is Congress justified in granting such private monopolies? Is the judiciary correct in continuously extending their areas of enforceability? Do they in fact "promote the progress of science and useful arts"?

These are not abstract issues. The outcome of the Bilski v. Kappos case currently before the US Supreme Court may substantially alter what is patentable.

As economists, we are convinced that incentives matter. So how can we argue that offering a reward in the form of monopoly does not increase creation and innovation?

Incentives cut both ways

As a matter of theory, intellectual property is a double-edged sword. On the one hand, giving a reward increases the incentive to innovate. On the other, allowing the monopolization of existing ideas taxes the creation of new ones, thereby decreasing the incentive to innovate. The bottom line: Contrary to widespread belief, economic theory does not provide support for the continuous extension of IP. The only answer to the question of whether IP serves the desired purpose must be empirical. Does it work in practice?

A great deal of applied economic research has tried to answer this question. The short answer is that intellectual property does not increase innovation and creation. Extending IP rights may modestly boost the incentive for innovation, but this positive effect is wiped away by the negative effect of creating monopolies. There is simply no evidence that strengthening patent regimes increases innovation or economic productivity. In fact, some evidence shows that increased protection even decreases innovation. The main finding is that making it easier to get patents increases … patenting!

The heavy price we pay for patents

Ideas kept under lock and key are much less useful than those that are freely available. So we find Africans dying of AIDS because they cannot afford to pay monopoly prices to patent holders of certain drugs. Or, at a more mundane level, we cannot legally watch movies on our new Android phones because "rights holders" do not wish us to. And we must suffer through such indignities as being sued by voting machine companies over copyright violation when their malfunctioning software is revealed to the public.

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