Friday, July 17, 2015

Intellectual Ownership ...or Free Ideas

Is intellectual property necessary for innovation? Is it counterproductive? For the first time, the publication of significant quantities of evidence from the Human Genome Project demonstrates the latter.

We owe the definitive empirical proof to the recent paper byHeidi Williams, a Ph.D. student in Economics at Harvard University.

Williams analyzes the consequences of the Human Genome Project, whose results from the sequencing of the genome belong to the public domain, with those of Celera, a business that hoarded its results under patents.

What’s interesting is that there are genes that were originally protected by Celera, which, by being resequenced through public effort, then became patent-free. This way, Williams could really do two different studies: in one, she compared the impact of patented genes with genes in the public domain from the moment of their sequencing, and in the other, the result of genes that were originally Celera’s being devolved to the public domain.

The result in both cases was similar: patents decreased innovation and its results by 30%. Additionally, in the cases where Celera enjoyed a brief period of monopoly, the negative effects on innovation were maintained, though at a smaller scale, after the gene sequencing was released. That is, the negative effects of intellectual property on innovation tend to persist even after the end of legal protection.

We already knew from theoretical models and the scarce empirical evidence available that a pharmaceutical market without patents would, in all likelihood, see greater investment in R&D because only innovation would guarantee temporary extraordinary rents close to those of monopolies. But it also would see a rapid expansion of innovations, in the form of generics, in less-developed nations.

Now we know also that biomedical patents reduce innovation by a third, but also that as short as the period of monopoly may be, the social cost tends to be maintained over time. If we add up both results, the political consequences are clear: the political and social objective should no longer be the reduction in time or place for exclusive use, but rather its total elimination.

Hat tip Mark Lansbury