Fix Features

Intellectual Protection Laws: Let Freedom Ring to Boost U.S. Economy

by Joseph Diedrich - University of Wisconsin-Madison on January 24, 2013

Politicians take note: Loosening America’s intellectual protection laws could help jumpstart the economy.

Several countries with weak intellectual protection laws have the fastest growing emerging economies, meanwhile the United States – which has some of the strictest IP rules – is stuck in a Great Recession.

Recent empirical evidence and policy analysis have revealed the reason for that is tough intellectual property laws inhibits competition, and economic growth is hindered by their existence.

Last month, the Global Intellectual Property Center in conjunction with the U.S. Chamber of Commerce released a report evaluating intellectual property laws in eleven different countries using categories such as patent law, copyright law and trademark law.

The United States ranked the highest of those studied, meaning its IP protection is the strongest in the world; worst among the eleven were Russia, Brazil, China, and India.

Yet Brazil, Russia, China, and India have something else in common. Despite weak IP protection, these four countries have the fastest growing emerging economies.

In a February 2012 report by Price Waterhouse Coopers, these four countries—the “BRIC” nations—had average annual growth rates between five and nine percent in terms of GDP, up to three times the growth rate of the U.S.

Another recent report issued by the Republican Study Committee indicates a shift in—or, at the very least, a questioning of—the general milieu surrounding IP protection.

The paper, “Three Myths about Copyright Law and Where to Start to Fix It,” was authored by Derek Khanna, who was later removed from the study committee amidst intense backlash from the entertainment industry.

Before being retracted, Khanna’s analysis concluded that overzealous copyright law was responsible for “retard[ing] the creation of a robust DJ/remix industry,…hampering scientific inquiry, [and] penalizing legitimate journalism and oversight.”

He also offered different ideas for IP reforms, including limiting the length of time a work can remain under copyright.

Khanna’s arguments support the notion that copyright and patent are nothing more than government-granted monopolies, and where monopolies exist, inefficiency abounds. IP inhibits competition, and empirical evidence suggests economic growth is hindered by its existence.

“Copyright violates nearly every tenet of laissez faire capitalism,” notes the Republican Study Committee report. “Under the current system of copyright, producers of content are entitled to a guaranteed, government instituted, government subsidized content-monopoly.”

Moreover, in the book “Against Intellectual Monopoly,” authors Michele Boldrin and David Levine conclude innovation is greater under free competition than in the presence of IP, and that IP is “damaging for society, as valuable productive capacity is literally destroyed and thrown away.”

Consider this: open-source software innovators willingly freely share their innovations and make no small amount of money doing so; authors use the Creative Commons to attribute their works to the public domain immediately, bypassing conventional copyright; and Korean pop sensation Psy is worth millions of dollars in no small part because he welcomes the unregulated sharing and “pirating” of his name and brand.

In contrast, in a recent example of squandered wealth, Carnegie Mellon University won a lawsuit worth $1.17 billion against Marvell Technology Group for infringing upon two of its patents.

While correlations between innovation, economic growth, and the number of patents and copyrights issued exist, calls more stringent IP protection on these grounds is fallacious, according to Stephan Kinsella, an intellectual property lawyer and libertarian legal theorist.

“The argument…assumes that innovation is critical to prosperity and economic development—true enough—and then correlates patents with innovation,” he states. “But not only is this correlation problematic—not all patents are innovative and not all innovation is patented—but even if patents are correlated with innovation, correlation does not prove causation. It is equally as plausible, in fact more plausible, that innovation persists despite, not because of, a patent system.”

Fix contributor Joseph Diedrich is a student at the University of Wisconsin-Madison.

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Tagged as: BRIC nations, Carnegie Mellon University, copyright, Derek Khanna, Global Intellectual Property Center, Great Recession, intellectual protection laws, IP protection, Korean Psy, laissez faire capitalism, Marvell Technology Group, trademark, U.S. Chamber of Commerce

  • JSX546

    You present only one side of the argument. As an entrepreneur who has invested substantially in time and money (well into the six figures) in a number of invention ideas, I can tell you that the only protection I as an individual (or any small entity) can obtain is through patenting. Non-disclosure agreements can provide some protection for trade secretes; however, when dealing with a big company with billions of dollars in valuation and deep cash reserves with top legal talent on retainer, the individual or small entity inventor has little recourse should the larger company simply decide to take the trade secret/invention/innovation and develop/commercialize it on their own. The only thing I have found these companies to respect on a consistent basis is patent rights. Few, if any inventors/innovators, would ever invest any significant amounts of time and/or money without the possibility of being granted such rights. My feeling is you would see very little innovation from individuals and smaller entities if patent rights did not exist or were not strictly enforced. Most, if not nearly all, innovation would originate within large companies with the resources and infrastructure to protect such innovation as well as to compel compliance from their employees to not disclose such innovation to unauthorized third parties. Additionally, countries such as China which you indicate have loose IP protections are growing faster than the US for a number of reasons. New products may be developed in China at a higher rate than in the US; however, I would call this pseudo-innovation. I personally abandoned all of my IP in China when I got the impression that enforcement of such IP would be virtually impossible. Much of what you term innovation and which I term pseudo-innovation in China are likely ideas/inventions developed or conceptualized in countries such as the US with strong IP protection. From what I have been told by many others in the entrepreneurial world, many of what you would call innovations in China are simply plagiarized ideas and inventions from the US. My understanding is that not much significant innovation actually occurs in China because there is no way to protect ones ideas. Absent countries like the US with strong IP protection, countries like China would not likely have much of a feeder source for their pseudo-innovations.
    Where the USPTO does need reform is in dealing with its backlog as well as getting some continuity in their examination process – the turnover amongst the examiners is staggering. Additionally, more clear cut IP protection is needed – I can’t tell you how many times an examiner has cited prior art which is completely different functionally and visually from the art I am seeking to patent and how frustrating it can be to have to teach some of the basics on how different inventions within a certain field actually work.

    • http://twitter.com/Hallingip Dale Halling

      So true. We spend billions on green energy products, but won’t even allow the USPTO to keep the fees it collects.

      The non-obviousness requirement has caused no end of problems. Until the Supremes screwed it up at least the CAFC had attempted to provide a logical framework. The standard is oxymoronic – Something that is new cannot be obvious at the time it was invented, since it did not exist. It also does not follow from any logical definition of invent or invention.

    • Joseph Diedrich

      (repeated from reply above)

      Patents and copyrights are in no way “property rights” and any suggestion they
      are is inconsistent with both freedom and laissez-faire economics. This
      apparent contradiction arises from a conflation of opposing ideas of
      “property.” The foundation of capitalism is the unwavering protection of
      tangible property rights. Private ownership of tangible property is a
      priori necessary for the peaceful development of the economy; physical
      resources are scarce, and therefore must be protected by a system of
      tangible property rights in order to prevent conflict. Ideas, on the
      other hand, are infinite—they are ever-abundant, cannot be used up, and
      cannot be “owned.” Tangible property rights and intellectual “property
      rights” cannot co-exist; they are antithetical to one another.

      For example, suppose that an author writes a book and makes a copy of
      it. There are now two books, one of which is purchased from the author
      by a reader. The reader now owns a book (tangible property), but
      copyright law prevents him from using his own paper and ink (also
      tangible property) to make additional copies of the book, even if he
      gives the author due credit for authorship. Control (and implicitly,
      partial ownership) of the reader’s physical
      resources—his book, paper, and ink, all of which are tangible property—is transferred to the author via IP rights. These “rights” actually violate and diminish legitimate tangible property rights. Stephan Kinsella, an authority on
      the matter, writes, “There is, in fact, no reason why merely innovating
      gives the innovator partial ownership of property that others already
      own.” All ethical defenses of IP are contrived and unjustifiable.

      Copyright and patent are nothing more than
      government-granted monopolies. Where monopolies exist, inefficiency
      abounds. IP inhibits competition, and empirical evidence suggests that
      economic growth is hindered by its existence.

  • Calistus O’Brien

    Take one point, ignoring all others, to show a trend that suits your argument.

    Here’s an illustration of your argument. I had no idea it was useful information, but there ya go.

    http://gizmodo.com/5977989/internet-explorer-vs-murder-rate-will-be-your-favorite-chart-today

  • http://twitter.com/Hallingip Dale Halling

    You neither understand freedom or laissez faire economics. The both require protection of property rights. Patents and Copyrights are property rights. You obtain property rights in the things you create, including inventions and artistic objects. The study was biased and ignored countries such as North Korea, no IP, most of Africa very little IP. It ignored that China and India have strengthened their IP rights over the last several decades and did not start to grow until they made these reforms.

    This is just an Open Source anti-property rights propaganda article. Open source makes big claims, but almost all of its products are derivatives of existing products. At best they make incremental advances.

    • Joseph Diedrich

      Patents and copyrights are in no way “property rights” and any suggestion they are is inconsistent with both freedom and laissez-faire economics. This apparent contradiction arises from a conflation of opposing ideas of “property.” The foundation of capitalism is the unwavering protection of tangible property rights. Private ownership of tangible property is a priori necessary for the peaceful development of the economy; physical resources are scarce, and therefore must be protected by a system of tangible property rights in order to prevent conflict. Ideas, on the other hand, are infinite—they are ever-abundant, cannot be used up, and cannot be “owned.” Tangible property rights and intellectual “property rights” cannot co-exist; they are antithetical to one another.

      For example, suppose that an author writes a book and makes a copy of it. There are now two books, one of which is purchased from the author by a reader. The reader now owns a book (tangible property), but copyright law prevents him from using his own paper and ink (also tangible property) to make additional copies of the book, even if he gives the author due credit for authorship. Control (and implicitly, partial ownership) of the reader’s physical
      resources—his book, paper, and ink, all of which are tangible property—is transferred to the author via IP rights. These “rights” actually violate and diminish legitimate tangible property rights. Stephan Kinsella, an authority on the matter, writes, “There is, in fact, no reason why merely innovating gives the innovator partial ownership of property that others already own.” All ethical defenses of IP are contrived and unjustifiable.

      Copyright and patent are nothing more than government-granted monopolies. Where monopolies exist, inefficiency abounds. IP inhibits competition, and empirical evidence suggests that economic growth is hindered by its existence.