Would you spend countless hours developing a novel business method if you knew you couldn't protect it with a patent? Most of us wouldn't.
Yet before the US Supreme Court is a case that could have severe consequences for the incentives that fuel such job-creating innovations.
While a ruling in Bilski and Warsaw v. Kappos isn't expected until next spring, let's hope the court doesn't fall prey to the arguments of Harvard Law School professor Lawrence Lessig and other supporters of the "open source" movement in computer software. They contend that intellectual property rights – which extend 20 years beyond the date a patent is issued – erect barriers to technological progress, discouraging collaboration and slowing economic growth.
Just compensation for hard work
In the Wikipedia age, it may seem that lots of people are happy to work free of charge for the common good. But the reality is that new ideas are scarce and their discoverers, as our Founding Fathers recognized, merit protection from those who seek to gain from their intellect, investments, and hard work without just compensation.
Article I, Section 8, of the Constitution explicitly delegates to Congress authority "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."
Developing and successfully commercializing new products and technologies typically requires large investments of time and treasure. Most research and development (R&D) investments end in failure.
Temporary monopoly is justified
Granting a temporary monopoly to the rare breakthrough is necessary, therefore, to provide its inventor with an opportunity to earn a return on the investment that led to the new idea – and to encourage additional such investments. Such protection is especially important in the pharmaceutical industry, where, in its absence, new drugs could be duplicated by competitors and the incentive to invest would disappear, stifling the discovery process.
To paraphrase the late economist Joan Robinson, patents and copyrights slow down the diffusion of new ideas for a reason: to ensure there will be more new ideas to diffuse.
It is true that other means exist for creative people to profit from their effort. In the case of copyright, authors can charge fees for reading their works to paying audiences. Charles Dickens did this, but his heavy schedule of public performances in the United States, where his works were not protected by copyright, arguably contributed to his untimely death.
Contributors to open-source software can gain personally from enhanced reputations in their tightknit communities. Inventors may also rely on secrecy (Coca-Cola's unpatented formula has never been duplicated) or simply take advantage of competitive lead time – making a profit before copycats enter the market.
The US Patent and Trademark Office, overwhelmed by the large volume of applications that it receives every day, tends to err on the side of granting new patents and copyrights, shifting resolution of predictable disputes to trial lawyers and the courts.
The hard questions are: What kinds of ideas should be eligible for patent and copyright protection, and how long should that protection last?
One size doesn't fit all
What's needed is a middle ground. Even if we can all agree that intellectual property (IP) is an important social commodity, one size doesn't fit all in the modern Digital Age. While a 20-year monopoly may be appropriate for new drugs, it may not be appropriate for software, a new electronic game or, as Justice Sonia Sotomayor seemed to suggest during questioning in the Bilski case, a new "speed-dating service."
Rather than abolishing patent and copyright protection for some categories of intellectual property, Congress and the courts should consider varying the length for which exclusive monopoly privileges are granted, depending on the expected commercial vitality of the creative work.
It is certainly true that, as contemplated by the 1998 Sonny Bono Copyright Term Extension Act, the authors of books, Walt Disney characters, and computer software will not likely be deterred from being creative if their children or grandchildren are denied royalty payments.
Science and engineering is a different story.
Incentives matter. Although there may be a passionate few who don't require payment for contributing to the common pool of knowledge, technological advancement will be much more rapid if an explicit economic payoff is available.