Who owns broccoli?

Who owns broccoli?

Intellectual Property Rights in a liberal context


Imagine somebody owns broccoli; not just broccoli but the essence of broccoli – its genetic code. Anybody who wanted to breed new varieties, or plant and sell broccoli would not only have to buy the seeds but would also have to pay the owner a royalty. Would it be good for gardening, leading to additional incentives to breed vegetables and to register new species? Or would it be bad for breeders trying to improve existing varieties and for customers who would have less choice and thus have to pay a higher price for seeds and produce? Have you ever asked yourself such questions? Not many people think about owning vegetables. However, the protection of ideas, concepts and creative works, as well as the illegal sharing of music files and bootlegs are on everyone’s mind. Hardly a day goes by without patent wars in the news.

Even among classical liberals, the principle of intellectual property rights, patent and copyright law are controversial topics. On the one hand, there are protagonists who advocate stern protection for immaterial goods and ideas. On the other hand, some classical liberals oppose intellectual monopolies. Some commentators point out similarities between the benefits of protecting private property rights for innovation and the efficiency of resource allocation. They fear a world without intellectual property as a socialist nightmare, where nobody is able to reap the fruits of their creativity. In an opposing view, other experts caution against the monopolization of ideas which place barriers in the way of creativity and reduce incentives to innovate. To this day there has been continuing dispute concerning the historical role of intellectual property rights. Were they established to promote economic development or merely to censor creative thinkers and to support political cronies?

In modern life, the economic and legal importance of intellectual property rights is remarkable. Whether through copying, sharing and application of content on the internet, the use of patents in science and industry or the application of ideas in computer and software design, fashion and even art, innovators are constantly confronted with the limits of intellectual property. Some have invested heavily in new ideas and want to make a reasonable profit, others want to use and combine successful ideas, but are restrained by legal obstacles. Protagonists from both sides argue either (i) that investments will not be profitable without granting protection or (ii) that there are countless examples which demonstrate that making a profit from innovations has no need of intellectual property rights. Indeed, some people wonder if, for instance, the computer industry really needs the protection of hardware designs or software code to profit from their often already hugely popular products. On the other hand, others fear that we will never see a cure for HIV without strict patent protection.

With this in mind, there is a clear rationale for political decisions regarding intellectual property. In our information-led age, this topic is far too important to be left to political pundits and industry lobbyists. At a 2011 conference, the Liberal Institute at the Friedrich-Naumann-Foundation for Freedom initiated an exchange of ideas on both, the history of intellectual property rights and important empirical aspects of copyrights and patents in our daily lives.  As well as identifying the similarities and differences of the positions among classical liberals, we hoped to inspire public debate and influence the political decision making process. We will outline the results of our conference in this post.

Terence Kealey puts intellectual property rights in a historical context. He critically assesses the development of patent protection over generations and cites cases of both use and misuse of patent law. Opposition to state protection of intellectual property rights is not only a contemporary phenomenon, but has a long tradition. Early critics of strong patent protection objected to state granted monopolies in an era of free trade. They were sceptical about the specialness of invention and considered inventive talent to be a common feature in the milieu of collective enterprise and one that was not necessary to encourage. On the contrary, they believed patents would encourage their holders to waste their lives in the fruitless search for returns on their patents. According to Kealey, there is ample evidence to confirm this opinion. He goes on to make a theoretical case for rethinking intellectual property rights and patents. Unlike material property, ideas are not rivalrous and only partially excludable. Thus, many people can simultaneously use the same idea without weakening its usefulness. Since a broad use of inventive ideas is clearly beneficial to society and the evidence for the effectiveness of patents in pushing innovation is weak, why should we create artificial restrictions? Perfect market models are no good guide to evaluate patent law because economic players don’t act in a stylized environment of perfect information, atomistic competition and reckless profit maximization. Humans, moreover, are complex, and they are incentivized by more than just money. Indeed, many scientists continue to make their work free and businesses continue to finance open source projects.

Stan J. Liebowitz asks if we should be concerned about the weakening of copyright and draws a different conclusion for copyrights than for patent protection. He highlights the importance of property rights in incentivizing people and enterprises to be productive, but also in promoting the freedom of producers to keep the benefit of their efforts. As a classical liberal, he prefers a system that allows individuals the freedom to reap the rewards of their efforts to a system that ultimately leads to greater GDP but violates the freedom of producers and consumers. In the case of copyright, he argues that giving authors the freedom to generate rewards from their efforts is more important than whether this leads to economic efficiency. According to Liebowitz, empirical evidence strongly suggests a weakening of intellectual property rights through piracy. Illegal file sharing is responsible for most of the decline in record sales. For him, making copies of someone else’s work is not competition but rather free riding. It doesn’t restrict competition because nobody is restricted in creating competing work or in entering the market. He argues that copyright is a means by which creators earn their incomes, incomes due to monopoly talent, not the literal monopoly from copyright. Regarding patent protection, he highlights an important difference to copyright. While copyright seeks only to prevent free riding, patents prevent inventive activities that clearly are not free riding. Patents prevent real competition and are more than just a reward for unusual talent. This weakens the case for patent law.

Product piracy and counterfeiting is the topic of Knut Blind’s analysis. Surveying German enterprises, he tries to analyse how product piracy and counterfeiting affect small and medium enterprises and if they restrict profits and innovation. Summarizing the results of the study “The Economic Relevance of Intellectual Property and its Protection” and analysing additional data, he underlines the increasing importance of intellectual property in a global economy. Enterprises report a high incidence of intellectual property infringement with however large differences between industries and size classes which are unequally affected by different types of imitations and identify different threats from domestic and foreign infringers. The heterogeneous distribution of damages among companies leads to different reactions by companies to the phenomenon of product piracy depending on intensity of damage and on company size. This is not only a challenge for companies but demands new approaches in policies for small and medium sized enterprises. Informal ways to keep competitors from re-engineering an invention seem to be more promising than focusing on patent protection. Improved training in intellectual property management skills in academic education is equally important.

Bernd Klein relates his personal odyssey through the abyss of intellectual property rights from the perspective of a software developer who happens to invent a mathematical algorithm and use a software programming language to implement it. Realizing his invention infringes a software patent he has never heard of gives him a tough lesson in the realities of intellectual property rights and ends his dream of intellectual property rights as a means to provide inventors, scientists, thinkers, designers, and others with essential incentives to produce and release new creative materials. He argues not only from his own experience but from a theoretical perspective that so called intellectual property does not enrich the society. There are a vast number of daily cases where patents and copyrights create dis-incentives to innovation and creativity. Creators often have to go to huge expense to prevent patent and copyright infringement even if there is no evidence of business disadvantages on behalf of the holders of rights. He mentions a couple of cases where seemingly petty infringements can lead to high costs for innocent internet users. This clearly shows that copyright significantly increases the cost of creation. According to Klein, trying to avoid or limit these expenses often results in creations of poorer quality and sometimes prevents creative work. Freedom of speech is another reason to be suspicious of intellectual property rights. When copyrighted images are so deeply embedded in our cultural heritage, we should be allowed to employ such creations freely in the name of free speech. Given the current state of copyright law, he does not hold out much hope for positive changes. Regarding patents, he argues that patents are often granted to obvious pseudo-inventions containing no novelty. Such patents don’t promote invention but rather grant a monopoly to exploit common knowledge. Nevertheless, he believes that more and more creators are forfeiting their potential individual claims to patent or copyright their contributions. Even certain companies are demonstrating that they can be more successful than businesses relying on patents or copyrights. Open source software is a popular example. Despite many attempts to stop free operating systems like Linux or Android, challenging the markets of old-established firms, their technical development and market penetration is thriving. Even if Klein’s initial dream of intellectual property rights promoting inventiveness was dashed, he now dreams that lawmakers will realize that patent and copyright laws should be changed in order to prevent the restriction of our potential to develop, create, or invent. A shortening of the terms of duration, granting patent and copyrights less generously, more fairness regarding “fair use” and less litigation against adaptation would help to further his dream.

These four contributions clearly show the theoretical and practical complexities of intellectual property rights. Despite their differences, the authors agree in the necessity to reappraise patent and copyright law from a liberal point of view. The current state of law doesn’t adequately meet the requirements of a manageable and incentive-compatible intellectual property rights regime. Whilst we do not present sweeping solutions to this problem, we are determined to steer the discussion in a more helpful direction.

This Post is adapted from the book “Who owns Broccoli? Intellectual Property Rights in a Liberal Context”, Ideas on Liberty, No. 9, 2011.

Steffen Hentrich