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In this point-counterpoint series, the Rt. Hon. professor of intellectual property law ponders the question of abolishing patents, raised in a recent working paper by the Federal Reserve Bank of St Louis.
“I knew that a country without a patent office and good patent laws was just a crab, and couldn’t travel anyway but sideways or backwards.”
- Mark Twain’s Connecticut Yankee at the Court of King Arthur
“So long as men are governed by unexamined prejudices and led away by sounds, it is natural for them to regard Patents as unfavourable to the encrease of wealth. So soon as they obtain clear ideas to annex to these sounds, it is impossible for them to do otherwise than recognize them to be favourable to that encrease: and that in so essential a degree, that the security given to property cannot be said to be compleat without it”
- Jeremy Bentham in the late 18th Century
“Floods of patents are issued … the validity of which is uncertain. At the meeting of the British Association, held in 1931, we heard patents described as ‘lottery tickets.’ Manufacturers can never tell whether they are infringing on some patent and becoming liable to heavy damages. ‘A bad patents system,’ writes Nature in connection with this point, is ‘a fetter on the hands of industry and an instrument of blackmail.’”
- Michael Polanyi, scientist, in 1944 (I am grateful to Rosemarie Ziedonis for this quote)
“The best solution is to abolish patents entirely through strong constitutional measures and find other legislative instruments, less open to lobbying and rent-seeking, to foster innovation whenever there is clear evidence that laissez-faire under-supplies it.”
- Boldrin and Levine, “The Case against Patents” September 2012
Who is right, Twain and Bentham or Polyani and Boldrin/Levine? One side or the other must be wrong. I think the answer is easy. Twain and Bentham. And not just because they write better. I think you can prove it by asking yourself a few simple questions:
1. How many major new medicines did the command economy of the Soviet Empire produce (Answer: None);
2. Imagine you have a good idea and want to develop it for the market. But, as is usually the case, quite a bit of work, time and expense would be needed to do that, you don’t have a lot of money and you’re not sure that the product will sell. So you go to a potential investor or bank for some money. They ask “well suppose it works, what’s to stop others from copying?” You answer “nothing, people will easily be able to undercut because they do no research.” Question: “will you get the money?”
3. Does the development of mobile phone and computer technology seem very fast to you? Does it look like patents have impeded that development?
4. Why do big pharma and high tech companies often spend as much as 17% of their turnover on research? Has it anything to do with the fact that the patents on their existing products are going to expire?
5. Why have the Chinese, a communist country, invested so much in creating a patent system since 1994? Are they stupid or something?
6. Are you likely to change your mind because some economists have produced some equations based on simplistic assumptions with no way of knowing reliably or at all what numbers to put into them?
Finally there is a different question. Could the patent system be improved, for instance in the US by abolishing jury trial, keeping damages rational and introducing the English rule as to legal expenses – “loser pays”?
Read Bruce A. Lehman’s counterpoint on abolishing patents.
Rt. Hon. Professor Jacob is the Hugh Laddie Professor of Intellectual Property Law and Director of the Institute of Brand and Innovation Law at University College London.
Prof. Jacob and Mr Lehman responded to The Case for Abolishing Patents, a recent article in The Atlantic describing the Federal Reserve Bank of St. Louis Working Paper by Boldrin & Levine: The Case Against Patents.