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For Green IP, Less is More
Michele Boldrin is a professor of economics at Washington University and, along with colleague David K. Levine, the author of Against Intellectual Monopoly.
The main argument advanced in our book, Against Intellectual Monopoly, is that patents and copyrights are damaging private monopolies. By means of historical example, as well as statistical and economic analyses, we show that intellectual monopoly is not necessary for innovation and is, in fact, damaging to economic growth and prosperity.
It is common to argue that, in principle, intellectual property in the form of patents is necessary for the creation of ideas and inventions such as machines, drugs, and computer software. But the fact is that this is not so in practice, as an increasing amount of evidence shows. Far from stimulating creation, intellectual property protection—due more to a mixture of legal acumen and abundant resources than anything else—is primarily used as a tool to prevent economic progress and hurt competitors.
That innovators deserve compensation for their efforts is not being debated here, but it is a long and dangerous jump from this to the conclusion that patents and copyrights—that is, monopoly—are the best or the only way of providing that reward. There are many other ways in which innovators can be rewarded, and most of them are better for society than the monopoly power patents and copyright currently bestow. Maintaining the current system, but reducing the term of a patent (or introducing renewals at various stages in the term of the patent) would be a short-term improvement; a medium-term improvement would be to replace the current system with privately contracted licenses, which would mean that violations of the terms of agreement would be treated as breach-of-contract. A long-term alternative that seems particularly appropriate for innovations in green production technologies would be the complete abolition of intellectual property protection.
Green production technology seeks to reduce manufacturing’s footprint on the environment. It acknowledges the externalities generated by almost all production processes and seeks to internalize their cost—a strategy that results in greater benefits to society since all costs of the process are considered when making production decisions. Thus, any invention leading to a greener technology will have its greatest social impact if it becomes possible for other manufacturers to also adopt and improve it, so as to maximize the global manufacturing footprint reduction. Barring some manufacturers from this technology—say, through patent—forces them to damage the environment more than necessary and runs counter to the overall goal.
New technologies, though, are expensive to produce and green ones are no exception. How would one reward the creator of a new green technology in the absence of patents? There are multiple venues. First and foremost, new technology offers advantages in complying with environmental standards: To the extent the latter carry penalties/fees, the profit is immediate. Second, there is the fact that preferences are shifting in favor of goods and services with low environmental impact, hence the classical “first mover advantage” providing innovators with large and sustained rents. Third, it is obvious that a substantial fraction of green innovation needs to be taught and explained to be useful, and this can be done for a fee. Fourth, the best use of public money to support the environment is to reward with monetary prizes those firms that discover and introduce green technologies, once the lower environmental impact of such technologies has been tested and proved.
Taking into Account the True Costs
Carlos J. Serrano is an assistant professor of economics at the University of Toronto, where he studies the economics of innovation and technological change.
In contrast to the diffusion of HIV-AIDS drugs, the diffusion of existing green technology to developing countries is not currently limited by the existence of patents; it is hampered because private firms do not internalize the social costs of polluting. That is, it is cheap to pollute, and existing green technologies are not productive enough.
To deal with the problem of climate change, governments have two options (which are not necessarily mutually exclusive). One option is to foster the development of green technology through subsidies. Subsidies will reduce research costs and will likely generate new and better green technologies. The second one is to align the private cost of polluting with its social cost through policies like cap-and-trade systems, eco taxes, etc. Both domestic and foreign firms will pollute excessively unless they face the true cost.
Furthermore, since climate change is a global issue, economic policies addressed at reducing it will likely require coordination among nations. The biggest challenge our policy makers will face is the design of economic policies so that developing countries like China and India will find it optimal to adopt green technologies.
It Is the IP Culture, Not the Law, That is the Problem
Dennis Pamlin is a senior associate at the Chinese Academy of Social Sciences and global policy adviser at WWF. The opinions in this text are those of the author, not the organizations for which he works.
The question of intellectual property has become key in discussions about climate change and new technologies. In the short term, the IP discussion is about existing solutions or solutions that could be implemented quickly. It’s evident that current IP protection could help companies invest in solutions for reducing emissions. And overall, it is reasonable to assume that continued IP protection would support investments that deliver incremental improvements.
The challenge, however, is that we need more than incremental improvements. Anyone attending a symposium/conference/workshop about innovation will see that very few of the ideas developed by entrepreneurs have anything to do with the challenges we face. This fact has very little to do directly with the IP system itself and more about the culture surrounding the system.
As we move ahead, three areas need to be included in the IP discussion:
First, how we can distinguish between sustainable solutions and unsustainable solutions? Today no such system exists, and there’s no way to know which solutions deserve our attention on the IP level. The system doesn’t need to be perfect—just being able to do a rough categorization would help us understand what kind of solutions are being developed. Then we could investigate a framework to disseminate those solutions.
Second, and perhaps most important, is to create a culture where individuals and companies are inspired to find solutions to the challenges. If innovators and investors could assess how many people are helped with different solutions, we wouldn’t have to rely on short-term economic gains and pure curiosity to guide technological development. Using increased connectivity to provide real-time information about the situation around the world could encourage people to spend more time trying to solve the food and climate crisis and less time developing iFart applications.
Third, we need to improve the transparency around the financial rewards for different kinds of innovations. It would become obvious that we are spending incredible amounts of money on things like incremental improvements in coal and fossil fuel cars when much better solutions exist. This in turn would expose the fact that many companies are encouraging innovation based on their current business model, rather than the best way to provide different services for people. Protecting IP rights for solutions that destroy the planet, when parts of these solutions could be used in another context to help the planet, does not make much sense at all.
Originally published July 30, 2009
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