Patently Interesting

Economist Joseph Stiglitz has an interesting op-ed piece in the New York Times about intellectual property and its role in enforcing and increasing economic inequality. He specifically talks about the recent Supreme Court case of Association for Molecular Pathology v. Myriad Genetics in which Myriad Genetics had patented two human genes. In his op-ed piece, Professor Stiglitz writes about the real-world implications of this specific instance. However, while this op-ed piece is definitely worth a read, the more interesting part is the link to his expert declaration with the court in which he outlines the economic theory against the argument that it is only strong intellectual property rights that create incentives for research and development and that without them, R&D simply would not exist on the same level that it does today.

The economic case against strong intellectual property rights rests mainly on the "chain-reaction" nature of technological advancement. That 1) a current invention is building upon existing technology; and 2) future inventions will follow from the current invention.

With regards to part 1, Professor Stiglitz states: "The 'marginal social return' is having innovation available earlier than it otherwise would have been. In other words, if the invention was to have occurred anyway, then the contribution of the 'inventor' is that it occurred earlier than it would have without the incentives offered by the patent system." This takes a largely deterministic view of scientific advancement (something that is in line with our understanding of the simultaneous discoveries of the theory of evolution and calculus) with the implication that the "inventor" is receiving rewards that far exceed his or her contribution to society.

With regards to part 2, Professor Stiglitz states: "There are many instances where the intellectual property regime has impeded innovation, or would have done so had the government not intervened (as it did in the case of airplanes) or the Courts had ruled differently (as in the case of the development of the automobile)." Put in a different way, while the US patent system may encourage a quicker development of a particular invention, subsequent inventions that follow from that particular invention will be delayed for 20 years (the current length of a patent).

One other social loss that the current IP system engenders is the loss of competition. Firms may be encouraged to compete to be the first to develop a new technology, but once the new technology is patented, monopoly rights will be given and further developments in this technology will languish until the patent expires.

Sure, this is all well and good, and we now have a better understanding of the costs imposed by the patent system, but none of this addresses the core of the argument for strong patent rights: incentives for R&D! Don't worry, Professor Stiglitz addresses this with several arguments. One argument is a soft liberal argument of the pursuit being reward enough for most involved in the scientific community (and while this argument is good enough for my soft liberal heart, I'm sure many more people are rolling their eyes). The more convincing argument, however, is the licensing system. In the licensing system, inventors do not enjoy monopoly rights to their invention. The technology behind their invention is available for all to see, encouraging further development on top of the licensed invention. However, in order to use this technology, one must pay the inventor a licensing fee. Thus, incentives for R&D are preserved and technological advancement is unimpeded.