Q: Is Intellectual Property a Government-Granted Monopoly?

By Potts, Jason; Wilson, Tim | Review - Institute of Public Affairs, December 2012 | Go to article overview

Q: Is Intellectual Property a Government-Granted Monopoly?


Potts, Jason, Wilson, Tim, Review - Institute of Public Affairs


A: Yes, it is

JASON POTTS

Adjunct Fellow at the Institute of Public Affairs

Like most justifications of state intervention, intellectual property purports to solve a problem of market failure. New ideas are costly to create and the supporters of IP would be happy to create a little temporary monopoly if it brings forth all manner of flourishing in the creative arts and practical sciences. If only that was actually the case.

Intellectual property is not, as often implied, a logical extension of the property franchise, for this monopoly control is not a right regularly granted to owners of other types of property, where such restriction would be manifestly anti-competitive.

The standard defence of intellectual property seeks to emphasise rights to the fruits of one's own labour- the natural rights approach- or that it creates an incentive to innovate- correcting a market failure by internalising an externality. But this is not what intellectual property law is really about, which historically, has been the right to prevent others from competing with you; a protection that is highly valued in order to preserve an existing way of doing business.

Intellectual monopoly in copyright and patents is a relic from the mercantilist past and confers benefits on a concentrated few at the expense of the many.

More fundamentally: there is no evidence that intellectual property actually produces a net social benefit, in the sense that the social gains from increased production of new ideas is greater than the costs incurred in higher prices, constraints on reuse of ideas, economic distortions and deadweight losses, and the substantial overhead costs in operating the system.

Any form of protection of one small group at the expense of all others is unlikely to pass any social cost-benefit test.

There is overwhelming evidence that the market for ideas works just fine in the absence of intellectual property. Most of the major ideas in modern computing were developed before IP was extended to software in 1981. Vibrant creative industries such as fashion and food work entirely without patent and copyright protection. Historically, the development of the steam engine, electricity and aircraft only took off after the patents on these technologies expired.

In the absence of intellectual monopoly control over the use of copies, producers of ideas find other ways or business models to create value. There are other, better mechanisms to incentivise creative production and innovation that are less distortionary and controlling. Sometimes first mover advantages are sufficient, or sometimes business models can be adapted.

But besides all the bad rentseeking economics and politics associated with intellectual monopoly, its most basic problem is that it simply gets the theory of ideas wrong.

IP law is premised on a production function for new ideas with inputs of labour and resources. But the main input into new ideas is the modification, development and remixing of old ideas. By inhibiting the reuse of existing ideas you impede the production of new ideas. Yet this is exactly what IP does: it's just another monopoly that benefits the few at the expense of the many.

A: No, it isn't

TIM WILSON

Director of Climate Change Policy and the Intellectual Property and Free Trade Unit at the Institute of Public Affairs

Property rights provide the foundations for innovation in a capitalist society, and intellectual property does not create a monopoly but rather protects property rights and encourages innovation. …

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