Patent Law and, in general, intellectual property are at the center of the debate on innovation and economic development for good reasons. Its importance as a building block of the institutional organization of the economy can not be overstated. And economists and lawyers have struggled to make proposals that can be widely accepted.
Although I am not an expert on the subject, I think there are some fundamental tenets that could be widely shared
First, the analogy between intellectual property and property over goods should not be pushed too far. Lawyers think analogically and analogy serves us well in most cases (we use known categories and frames to apply them to new facts or cases when we find that they are similar to the old ones) but analogy can lead us to the disaster if we are not able to properly distinguish the old and the new cases (“causes are never seen, only inferred”). It happens very often that tools can be effectively given new uses till we overstretch them and, for instance, we end by calling “persons” to contracts (as it happens with the analogy between individuals and legal persons) or “administrative contracts” to State commands. The problem does not lie on how do you call things. The problem lies in the legal rules you are going to apply to the new “thing” based on the chosen name for it. We should stop transferring the Law of Property to Intellectual Property and Patents.
Legal rules on intellectual property are very crude means to attain the said goals of promoting innovation and intellectual creations. Rules on physical property are as old as agriculture but intellectual property laws are a relatively recent phenomenon. Therefore, we have refined the Law of Property and we can be fairly sure that the arrangements are efficient. On the contrary, we are pretty sure that the Law of Intellectual Property and Patent Law are inefficient. The reason why is that the problem is so difficult that 300 years is probably not enough to solve it reasonably.
Both domains are very different, at least, in two important respects. On the one side, assigning property rights (right to exclude others from the use of a good) makes sense when scarcity abounds. Absent market failure, we know that private property is the best institutional arrangement to achieve efficient use of scarce resources or assets in order to avoid overexploitation and underinvestment. Works and inventions are not scarce. Therefore, other good reasons should be advanced to apply the Law of Property to inventions and intellectual works.
Many consequences result from this difference the most important being the public good nature of inventions and intellectual works and the insignificant cost of producing an additional unit (a feature accelerated by the digital revolution when “units” are copies of the product or work). Moreover, rights over inventions and intellectual works are very difficult to define. It is easy to put a fence between two pieces of land but it is very difficult to assign the rights when the property can be possessed by millions of people simultaneously. Uncertainty about the extent and the legitimacy of the claims also abounds.
On the other side, as analogy is the base of legal reasoning, imitation is the mother of innovation and economic development. You start copying and end by making a new artifact. This is, in my view, the main source of inefficiencies in the Law of Patents and Intellectual Property. A sensible legal system should promote innovation without preventing copy or imitation.
In very general terms, these two principles should help to put in place a much more efficient system of intellectual property.
First, if possible, patents that provide the patentee with a monopoly over a product should not be granted. It is clear that patents seldom grants a monopoly. We already know that patents are an important tool to promote innovation in the pharmaceutical field and not so much in other sectors. Most of classical patents awarded to manufacturers gave them no monopoly at all as only a specific procedure or application was claimed as the object of the patent. A monopoly over a medicinal is created only if there is only a product that can cure an illness. Therefore, same results could be obtained without infringement by trying a different path to achieve the same result. No patents should be granted to “texts” (software) or “results”, let alone to business formats or ideas.
Infringement of a patent can not be equated to stealing another (physical) property. If I take your cake I will be depriving you of it. If I copy your machine or your circuit you are still using it.
The general available remedy should be damages and not injunction or orders to desist. In cases of bad faith infringement, general Contract Law provides for overcompensatory damages. And, in order to correctly decide the compensation the inventor deserves, Jugdes should take a look at the patent granted and its merits. Not all patents are born equal. A system – again, an analogical use of the Law of Property – based on the validity or nullity of the patent (0/1) is most useful when we can be sure at a low cost that the claimant is the “legitimate owner” and the defendant is a trespasser or a thief but not in any other case.
Let’s change the metaphors we currently use. The case where an individual uses a patented product or process or reads a copyrighted work without paying a fee bears little resemblance to the thief who breaks into a house and takes over the TV set and much more with a hiker walking on a public land that decides to rest profiting from the shadow cast by a tree located on a private estate. If the owner of the farm is also the tree owner and the tree has been planted to give shade and the farm owner is entitled to all income produced by his asset, Does that mean we have to give the tree owner a right to prohibit the hiker to take advantage of the shadow cast by the tree? The owner can always cut the tree or place it in such a place that its shadow casts only inside his property borders. However, we do not want him to do neither (positive externalities). But should him be granted the right to prevent the hiker resting in the shade of the tree?
If we continue with the metaphor and we assume that there are other trees along the path that cast shadows on the road and that all of them are planted in private estates, we understand immediately that if the owners of all allongside properties agree to charge hikers thousand euro to rest in the shade or if they agree to cut down all the trees except one, the offenders are now the land owners (cartelists) since they are creating scarcity in order to maximize profits. The problem with copyright lies on the monopolistic character of distribution of protected works. Markets for distribution of copyrighted works are monopolistic and should be competitive because we can not get right prices without competition. Copyright owners (rectius, firms that aggregate copy rights and distribute them to the public) are a few (private firms or state-sponsored associations of authors) and – as the state owners – are able to control the route to market of copyrighted works. This must be put to an end. The inventor or the author that “publish” its invention or its work shall not be allowed to restrict distribution. They should be given only the right to get a fair share of the social benefits of its work. By fair I mean one that takes into account the fact that there is no such a thing as a sole inventor.
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