The Overwhelming Empirical Case Against Patent and Copyright

by Stephan Kinsella on October 23, 2012

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.1 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.2 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 Arts3 —that the cost of this system would be “worth it.” But they had no serious evidence. A hundred and fifty years 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.4

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.”5 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].6

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).7

And in a recent draft 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 [enormous] 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 expenditurein 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.8

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.9 Given the available evidence, anyone who accepts utilitarianism should be opposed to patent and copyright.10

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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.:

  1. See Boldrin & Levine, Against Intellectual Monopoly; and my post Yet Another Study Finds Patents Do Not Encourage Innovation. []
  2. Yet Another Study Finds Patents Do Not Encourage Innovation. []
  3. U.S. Const., Art. I, Sec. 8, Cl. 8. For more background on the origins of copyright in America, see references in note 53, supra [ The Stop Online Piracy Act (SOPA), recently defeated by a widespread Internet-based outrage, is a good example of a threat to freedom of expression in the name of copyright law. See Stephan Kinsella, SOPA is the Symptom, Copyright is the Disease: The SOPA Wakeup Call to Abolish CopyrightThe Libertarian Standard (Jan. 24, 2012). Regarding the origins of copyright, see Michele Boldrin & David K Levine, Against Intellectual Monopoly (2008), ch. 2, againstmonopoly.org; Eric E. Johnson, “Intellectual Property’s Great Fallacy” (2011) (“The monopolies now understood as copyrights and patents were originally created by royal decree, bestowed as a form of favoritism and control. As the power of the monarchy dwindled, these chartered monopolies were reformed, and essentially by default, they wound up in the hands of authors and inventors.”); Tom W. Bell, Intellectual Privilege: A Libertarian View of Copyright.]  []
  4. Fritz Machlup, An Economic Review of the Patent System 79-80 (1958), c4sif.org/resources []
  5. George Priest, “What Economists Can Tell Lawyers About Intellectual Property,” 8 Res. L. & Econ. 19 (1986). []
  6. François Lévêque & Yann Ménière, The Economics of Patents and Copyrights 102 (2004). []
  7. James Bessen & Michael J. Meurer, Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk (2008, excerpts available at researchoninnovation.org/dopatentswork/). []
  8. Michele Boldrin & David K. Levine, “The Case Against Patents”  (June 29, 2012 draft; available at http://levine.sscnet.ucla.edu). []
  9. See, e.g., Stephan Kinsella, “Leveraging IP,” Mises Economics Blog (Aug. 1, 2010); and idem, “Milton Friedman on the Distorting Effect of Patents,” C4SIF Blog (July 3, 2011). []
  10. Another problem with the wealth-maximization approach is that it has no logical stopping point. If adding (and increasing) IP protection is a cost worth paying to stimulate additional innovation and creation over what would occur on a free market—that is, if the amount of innovation and creation absent IP law is not enough, then how do we know that we have enough now, under a system of patent and copyright? Maybe the penalties or terms should be increased: impose capital punishment, triple the patent and copyright term. And what if there still is not enough? Why don’t we expropriate taxpayer funds and set up a government award or prize system, like a huge state-run Nobel prize with thousands of winners, to hand out to deserving innovators, so as to incentivize even more innovation? Incredibly, this has been suggested, too—even by Nobel Prize winners and libertarians. See Stephan Kinsella, “$30 Billion Taxfunded Innovation Contracts: The ‘Progressive-Libertarian’ Solution,” Mises Economics Blog (Nov. 23, 2008). []
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