Comment I: Public Goods and Public Science

Summary

A major theme in Paul David's contribution to this volume is that the recent strengthening of intellectual property rights (IPRs) in the United States and elsewhere is a worrying development. I certainly agree that the development is cause for concern, but perhaps some elaboration will help clarify just why it is so disturbing.

Let us focus on the supply side, that is, on the promotion of innovation, which, after all, is the primary justification for creating IPRs in the first place. Of course, strengthening property rights also affects consumers on the demand side. But if the rate of invention diminishes after a strengthening of IPRs, which I will argue is quite plausible, then the overall outcome is unambiguously negative, because these monopoly rights will drive up prices for the goods deriving from innovation.

As David observes, there are two major effects on innovation from making IPRs stronger. The direct effect is to encourage more invention. If I am going to be rewarded with a longer or broader patent whenever I discover something, I will have correspondingly more incentive to try to make such a discovery. However, the indirect effect is to deter innovation. If the property right you have to your invention is strengthened, you will then have more monopoly power over me if I try to use your invention to make one of my own. In other words, it will now be more expensive for me to innovate, and so I have less incentive to do it.