More Thoughts on Patents and Copyrights

Print
Tuesday, 25 June 2013 04:34

Since my comments on Greg Mankiw's defense of the one percent prompted so much response, I thought I should add some clarification on the treatment of patents and copyrights. First off, my main point is that these are government policies designed to meet a public purpose (i.e. promoting innovation and creative work), not natural rights that are an end in themselves. In this sense altering them does not raise questions of rights as would restricting the freedom of speech or assembly.

Those who like to point to the constitutional origin of these forms of property should note where patents and copyrights appear in the constitution. They are listed as a power of Congress along with other powers, like the power to tax. They do not appear in the Bill of Rights where rights of individuals are explicitly described.

The constitution authorizes Congress to create monopolies for limited periods of time "to promote the Progress of Science and useful Arts." In this sense, patents and copyrights are explicitly linked to a public purpose. If it were determined that patents and copyrights are not the most efficient means for promoting innovation and creative work, and therefore Congress decided to stop authorizing these monopolies, individuals would have no more constitutional basis for complaint than if Congress decided that it didn't need to raise taxes.

Once we recognize that patents and copyrights are policies to promote innovation and creative work then the question is whether they are best policy and if so, are they best structured now for this purpose. Neither assumption is obvious and I would argue that the latter is almost certainly not true.

In terms of whether these are the best policies, in my earlier post I was simply pointing out that alternative mechanisms already exist and support a great deal of work. I actually didn't advocate any specific policy, but I have written on alternatives to both. Here's a discussion of alternatives to patent supported drug research and here is a proposal modeled after the tax deduction for charitable contributions for supporting creative work. (By the way, the folks who were arguing for the merits of markets over central planning are in the wrong place. You were looking for Joe Stalin's blog, there is no proposal for central planning in my work.) 

 

I would also point out, especially in the case of patents, that the best policy may not be the same in all areas. For example in the case of prescription drugs, the monopoly provided by patent protection essentially provides the basis for the price of the product, often raising the price many thousand percent above the free market price.This provides enormous incentive to drug companies to mislead the public about the safety and quality of their drugs. Given the enormous asymmetry of information (the drug companies know much more about their drugs than patients or doctors), they are likely to be able to get away with considerable deception.

The story is very different with a patent on an industrial process, where the licensing fees may be a small portion of the price of a car or a television set. It's entirely possible that we would want to rely largely on patents in some areas while developing alternative mechanisms in others. 

The other point which seemed to confuse many readers was my comment that the length and scope of patents and copyrights are infinitely malleable. Comments focused on the length part whereas the scope part is probably more important.

There have been efforts in recent years to make very broad patent claims. For example, Apple sued Microsoft over Windows, claiming that it had the same "touch and feel" of the Apple operating system. (Apple lost.) In the same vein, Amazon sought to patent its "one-click" ordering system where a company retained shipping and billing information, thereby allowing consumers to buy a product with a single click of a mouse. (Amazon also lost.)

Whether patent claims in general are interpreted very broadly or narrowly will make an enormous difference to their value. There are also important questions as to how much of an innovation is necessary to get a patent. The U.S. patent office has been notoriously lax in issuing patents, having once issued a patent for a peanut butter and jelly sandwich. If patents are granted too easily, then large areas of commerce will be locked up by monopoly protections that serve no purpose. And the number of patent suits will expand enormously.

In the case of copyright, there are many important issues apart from duration, most notably with respect to derivative works. J.K. Rowling may own the exclusive rights to the Harry Potter books she wrote, but can she have the government throw me in jail for writing the best-seller Harry Potter Becomes an Economist? How about if I make a movie or write a song on Harry Potter? if people want to read my writing on how Harry Potter became a Nobel prize winning economist why should the government get in the way?

With both patent and copyrights there are also enormously important issues on questions of enforcement. The U.S. has very patent/copyright friendly legal rules that give an enormous advantage to the holders of these claims. This is hugely important since the vast majority of disputes are settled without going to court. If the default legal judgements tend to benefit patent and copyright holders (e.g. it is easy to get injunctions in patent and copyright disputes), then we have made these forms of property far more valuable.

There is also the question of the enforcement responsibilities of third parties. For example, I can be told by J.K. Rowling to remove the Harry Potter poem that someone put in the comment section of my blog. I would face fines and possibly imprisonment (if I don't pay the fines) if I ignore her request. There are efforts to take third party responsibilities even further with SOPA and PIPA. Such strong rules also do not follow directly from the existence of copyrights.

I could go on beyond the point of boring everyone, but the point should be clear. Patents and copyrights are government policies that could be altered in a wide variety of ways, many of which may allow us to much better meet the intended goals. For Greg Mankiw to imagine that patents and copyrights in their current form are optimal is just silly. If he wants to argue this position, that's fine, but he will have to do lots of homework. 

 

Note: Here's an example of the point I was making about stringent enforcement measures. A bank that wrongly forecloses on a mortgage would not face anywhere near as serious a penalty.