The Overwhelming Empirical Case Against Patent and Copyright

Below is an excerpt adapted from my draft paper “Law and Intellectual Property in a Stateless Society,” collecting and summarizing just some of the empirical case against patent and copyright.

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But even if we assume that the IP system does stimulate some additional, valuable innovation, no one has established that the value of the purported gains is greater than the costs. If you ask advocates of IP how they know there is a net gain, you get silence (this is especially true of patent attorneys). They cannot point to any study to support their utilitarian contention; they usually just point to Article 1, Section 8 of the Constitution (if they are even aware of this), as if the backroom dealings of politicians two centuries ago are some sort of empirical evidence in favor of state grants of monopoly privilege.

In fact, as far as I’ve been able to tell, every study that attempts to tally the costs and benefits of copyright or patent law concludes either that these schemes cost more than they are worth, or that they actually reduce innovation, or that the research is inconclusive. There are no studies unambiguously showing a net societal gain. There are only repetitions of state propaganda.

The Founders only had a hunch that copyrights and patents might “promote the Progress of Science and useful Arts” —that the cost of this system would be “worth it.” But they had no serious evidence. A century and a half later there was still none. In an exhaustive 1958 study prepared for the U.S. Senate Subcommittee On Patents, Trademarks & Copyrights, economist Fritz Machlup concluded:

No economist, on the basis of present knowledge, could possibly state with certainty that the patent system, as it now operates, confers a net benefit or a net loss upon society. The best he can do is to state assumptions and make guesses about the extent to which reality corresponds to these assumptions. … If we did not have a patent system, it would be irresponsible, on the basis of our present knowledge of its economic consequences, to recommend instituting one.

And the empirical case for patents has not been shored up at all in the last fifty years. As George Priest wrote in 1986, “[I]n the current state of knowledge, economists know almost nothing about the effect on social welfare of the patent system or of other systems of intellectual property.” Similar comments are echoed by other researchers. François Lévêque and Yann Ménière, for example, of the Ecole des mines de Paris (an engineering university), observed in 2004:

The abolition or preservation of intellectual property protection is … not just a purely theoretical question. To decide on it from an economic viewpoint, we must be able to assess all the consequences of protection and determine whether the total favorable effects for society outweigh the total negative effects. Unfortunately, this exercise [an economic analysis of the cost and benefits of intellectual property] is no more within our reach today than it was in Machlup’s day [1950s].

More recently, Boston University Law School Professors (and economists) Michael Meurer and Jim Bessen conclude that on average, the patent system discourages innovation. As they write: “it seems unlikely that patents today are an effective policy instrument to encourage innovation overall” (p. 216). To the contrary, it seems clear that nowadays “patents place a drag on innovation” (p. 146). In short, “the patent system fails on its own terms” (p. 145). See also p. 5: “Overall, the performance of the [U.S] patent system has rapidly deteriorated in recent years. By the late 1990s, the costs that patents imposed on public firms outweighed the benefits. This provides clear empirical evidence that the patent system is broken. . . . [O]ur analysis has relevance to innovation in other countries.”

And in a more recent paper, economists Boldrin and Levine state:

The case against patents can be summarized briefly: there is no empirical evidence that they serve to increase innovation and productivity, unless the latter is identified with the number of patents awarded – which, as evidence shows, has no correlation with measured productivity. This is at the root of the “patent puzzle”: in spite of the enormeous increase in the number of patents and in the strength of their legal protection we have neither seen a dramatic acceleration in the rate of technological progress nor a major increase in the levels of R&D expenditure – in addition to the discussion in this paper, see Lerner [2009] and literature therein. As we shall see, there is strong evidence, instead, that patents have many negative consequences.

See also Andrew Torrance: Patents and the Regress of Useful Arts:

Patent systems are often justified by an assumption that innovation will be spurred by the prospect of patent protection, leading to the accrual of greater societal benefits than would be possible under non-patent systems. However, little empirical evidence exists to support this assumption. One way to test the hypothesis that a patent system promotes innovation is experimentally to simulate the behavior of inventors and competitors under conditions approximating patent and non-patent systems. Employing a multi-user interactive simulation of patent and non-patent (commons and open source) systems (“The Patent Game”), this study compares rates of innovation, productivity, and societal utility. … Initial data generated using The Patent Game suggest that a system combining patent and open source protection for inventions (that is, similar to modern patent systems) generates significantly lower rates of innovation (p<0.05), productivity (p<0.001), and societal utility (p<0.002) than does a commons system. These data also indicate that there is no statistical difference in innovation, productivity, or societal utility between a pure patent system and a system combining patent and open source protection.

The Founders’ hunch about IP was wrong. Copyright and patent are not necessary for creative or artistic works, invention, and innovation. They do not even encourage it. These monopoly privileges enrich some at the expense of others, distort the market and culture, and impoverish us all. Given the available evidence, anyone who accepts utilitarianism should be opposed to patent and copyright.

Update: Courtesy of Andrew Torrance, mentioned in his 2011 Open Science Summit talk, a quote from this book: Patents in the Knowledge-Based Economy, Cohen & Merrill, eds. (2003) (Google books):

There are theoretical as well as empirical reasons to question whether patent rights advance innovation in a substantial way in most industries. …The literature on the impact of patents on innovation must be considered emergent. One reason is that the effect of patent policy has many dimensions … and these continue to challenge scholars both theoretically and empirically.

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Update: See also: The EU Suppressed a 300-Page Study That Found Piracy Doesn’t Harm Sales (9/21/17); What the Commission found out about copyright infringement but ‘forgot’ to tell us.

Heidi L. Williams, How Do Patents Affect Research Investments? (Jan. 2017):

“To summarize, evidence from patent law changes has provided little evidence that stronger patent rights encourage research investments…. The patent system is a widely-used policy lever attempting to better align the private returns to developing new technologies with the social value of those inventions. The past few decades have seen the development of large academic literatures in a variety of fields – including economics, law, and strategy, among others – investigating various aspects of the patent system. However, surprisingly little research has focused on empirically estimating the key parameters needed to evaluate the social costs and social benefits of the patent system. A half-century ago, Penrose (1951) and Machlup (1958) argued that insufficient empirical evidence existed to make a conclusive case either for or against patents. Today, I would argue that given the limitations of the existing literature we still have essentially no credible empirical evidence on the seemingly simple question of whether stronger patent rights – either longer patent terms or broader patent rights – encourage research investments into developing new technologies. While researchers have recently begun to make progress on the more limited question of how patents on existing technologies affect follow-on innovation (Galasso and Schankerman, 2015; Sampat and Williams, 2015), evidence on the overall effects of patents on research investments are needed as one input into optimal patent policy design.

Petra Moser, Patents and Innovation in Economic History (Feb. 2016): “when patent rights have been too broad or strong, they have actually discouraged innovation”

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As for studies trying to estimate the optimal patent and copyright terms, see my post Optimal Patent and Copyright Term Length.

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For some additional relevant posts, see the material collected at Selected Supplementary Material for Against Intellectual Property, and other posts, e.g.: