The early Austrians such as F. A. Hayek and Ludwig von Mises were skeptical of intellectual property. Although there has been a plethora of classical liberals who have portrayed intellectual property as a guarantee for social mobility to occur, government manipulation of market opportunity has created a problematic power concentration that has been granted and executed by the politicians in Brussels.According to the EPO, since 2020 67-74 percent of patent applicants have been from “big companies,” this means that more than two thirds of all the applications come from the 0.2 percent biggest companies in the world. This is due to the large costs of patent applications. The average cost of an EU patent is €15,000-€30,000, this causes significant barriers for small companies that want to apply. The entire system is made to concentrate most of the power in as few hands as possible.

But not only is intellectual property bad in practice, it is also unethical in theory. The best way of showcasing this is with Thomas Jefferson’s candle analogy: If two people sit with one candle each next to one another and one of them steals the candle, he has violated his friend’s private property, but if he uses his friend’s candle to light his own, they both have the candle left and one has gained flame.

The flame is not scarce; this is what makes IP laws irrational. IP laws create an artificial scarcity, and the thing the government is making scarce is the opportunity to compete on the market and the opportunity to sell something, thereby removing creative destruction.

Moreover, when the state enforces IP laws, it restricts individuals from using their own physical property, for example: If a company is an IP holder of a medicine, the state is legally obliged to restrict other individuals from manufacturing this medicine even if they were to need it urgently and had the resources.

The pharmaceutical sector starkly illustrates the effect of IP laws on prices, since it is the most thoroughly researched. According to an FDA study by Conrad and Lutter (2019), prices behave as follows once a patent expires: when a single competitor enters, prices fall on average 30 to 39 percent within six months. After a year, with two to three competitors on the market, prices are down roughly 55 percent on average. After two years, with more than six competitors, prices can fall by as much as 95 percent. These figures speak for themselves: in a sector where low prices matter enormously, the state is actively suppressing both efficiency and competition, harming the very consumers it claims to protect.

Furthermore, the promise of patent protection has created perverse incentives for firms. Rather than innovate, they search for molecules with identical function but different structure to their already-patented drugs, purely to sidestep expiration deadlines. This state-granted monopoly ensures that capital stops flowing to where it would do the most medical good. Instead, it flows to wherever the monopoly is easiest to defend.

The European Union has tried to lessen the damage of IP laws by introducing a policy that cancels the entire patent if they lose a lawsuit about their use of said patent. However, the politicians have also made it easier to get IP rights across the entire EU, this is going to make monopolies in Europe even more common.

Another new policy to lessen the effect is the recent “Pharma Package” legislation that is actively trying to weaken the absolute monopoly power that IP traditionally gives to drug companies. The European Union’s goal is to rebalance the scales. This implicitly acknowledges that the union understands the damage that IP laws do to the market and how it puts the market off balance. Yet it is too afraid to abolish IP completely.

It is time for the EU to accept the fact that IP hurts consumers and creates false incentives for producers. Abolish the European IP laws and let competition run rampant.