Intellectual Property: Who Needs It? « Organizations and Markets

Intellectual Property: Who Needs It?

15 February 2007

| Peter Klein |

Michele Boldrin and David K. Levine provide a succinct overview of the economic argument against strong IP in the January 2007 issue of the Freeman. In “Open-Source Software: Who Needs Intellectual Property?” Boldrin and Levine argue that open-source developers benefit primarily not from writing code, but from selling complementary services such as support, and that these incentives, not altruism, are responsible for the substantial innovations coming out of the open-source community. They conclude:

[T]he market for software is not unique. Innovation and competition unprotected by patent and copyright have gone hand in hand in other industries, from financial securities to fashion. The message of open-source software is a message for all industries: IP not needed for innovation here.

Entry Filed under: - Klein -, Classical Liberalism, Institutions. .

3 Comments Add your own

1. Kevin Carson | 15 February 2007 at 5:39 pm

To the extent that innovation is a “shoulders of giants” phenomenon, strong IP is a toll gate that increases the cost of aggreggating the existing technical prerequisites of further innovation. Arguably, therefore, it hinders innovation as much as it provides incentives for it.

There’s a study online somewhere by F.M. Scherer on the link between patents and innovation. He found that some 80% or more of product and process innovations would have been made without patents, with competitiveness alone a sufficient motive.

The one exception he found was drugs–because of the supposed high cost–but I doubt that. Most of the actual costs of development come from gaming the patent system. Simply safety-testing a single chemical formula that optimally targets the therapeutic window would require only a fraction of total drug R&D spending. The added cost comes from doing enough research on related formulas to secure patent lockdown on the entire family of compounds. And patents also skew a large amount of R&D into the development of “me, too” versions of drugs whose patents are about to expire.
2. Tim Swanson | 15 February 2007 at 7:31 pm

Speaking of drugs, I am reminded of an interesting comment at Slashdot (spurred by the Michael Crichton op-ed in the NY Times).

Consider this: if you knew of 3 companies making the same new drug, who would you trust more? The company who spent years in clinical trials, showing you that their ingredients is safe, or the 2 companies who attempted to copy said drug through reverse engineering it — possibly incorporating something unsafe? The same is true with any “invention” that isn’t patented — you decide what product you need based on the cost and the safety. Sometimes the less expensive product is less safe or less effective, something that isn’t the case.

And regarding technology in the first place, is an interesting question raised at TechDirt:

If it was so expensive to develop the multi-touch technology (which isn’t new at all and similar technology has been demonstrated publicly in the past), then how would those other companies be able to just copy it? If it’s so easy to copy, then it shouldn’t have cost that much to develop.
3. spostrel | 17 February 2007 at 5:02 am

In general, the cost of inventing something is a lot higher than the cost of copying. If I find a chemical formula for a substance that does a particular job very well, I might have had to search a vast space of alternatives. But once the formula is known, anyone can synthesize the same substance. It’s hard to discuss a desirable IP regime if such facts of life are ignored.

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