[ * Long post]
Objective of this post
Patent is not an ‘inherent’ right enjoyed by an inventor. This understanding is crucial for appreciating the relevance of ‘patent working’ norms. This post discusses some of the prominent justifications and their pros and cons. Barring the natural law justification (which is now considered to be a weak justification for patents), all the other justifications, in one way or another, revolve around the argument that benefits of patent regime outweigh its costs.
Jurisprudential justification of patents
IPRs are expected to be tools for economic and cultural development which should contribute for the enrichment of society through (a) the widest possible availability of goods, services and technologies useful to society and (b) the highest possible level of economic activity based on the production, circulation and further development of such goods, services and technologies. These objectives are supposed to be achieved as owners can seek to exploit their legal rights by turning them into commercial advantages. The possibility of attaining such advantages, it is believed, encourages innovation and creativity. But after a certain period of time, these legal rights are extinguished and such unprotected inventions and works can be freely used by others.
IPRs, especially patents, are often portrayed by economists as a kind of regulatory response to the failure of the free market to achieve optimal resource allocation for invention. While they are designed to create a market for knowledge by assigning proprietary rights to innovators which enable them to overcome the problem of non-excludability they also encourage the maximum diffusion of knowledge by making it public. Hence they contend that granting of temporary legal monopolies would stimulate greater investments in inventive/creative activities. But in some cases, innovation is more likely to flourish in a weak IPR regime which shall facilitate the widest possible dissemination of new goods and services deriving from creative activity and the technical knowledge. Historical evidence indicates that modern day developed countries had adopted this approach in the past.
I agree that the promise of a period of market exclusivity may encourage investment in R & D. But such public goods- based justifications of IP may not be reliable in all cases. This justification is based on an over simplistic assumption that innovations are discrete and independent. In reality, innovations tend to be cumulative and dependent. Moreover, reproducing them may depend on tacit knowledge which cannot easily be documented in written form such as in a patent specification and is therefore available only to the innovator. Apart from – partly because of – the fact that intellectual works are not necessarily public goods, it is extremely difficult to determine an optimal level of protection for achieving an optimal allocation of resources towards inventive activities. The difficulty for policy makers in designing an optimal system is further compounded by the difficult tasks of ensuring that protection is both effective and at the same time not unduly restrictive of the freedoms of follow-on-innovators. In other words, patents are to be designed to balance conflicting aims and interests so as to effectively achieve certain public policy goals. Striking an optimum balance is extremely important if public good is the ultimate measure of such optimality.
The rationale for IPR protection particularly patents shall be presented from the following perspectives[1]:
- Natural law rationale
- Utilitarian rationale
- Contract rationale
- Reward rationale
- Incentive rationale
- Prospect theory
Natural Law Rationale
According to rights based justifications for IPRs, property right in intellectual works is primarily a matter of justice rather than of public policy. IPR laws exist to define and enforce the property rights as enjoyment of property right over one’s creative work is a human right. According to such a view, unauthorized use of somebody’s invention or creative work is an unfair – and therefore illegal – intrusion into the creator-proprietor’s freedom to benefit from its use without interference.
The assumption that individuals have an automatic property right in their ideas started gaining ground in the late 18th century. Philosophers like John Locke argued that men have natural rights in the fruits of their labour. They argued that property right arises from the mixing of labour with objects. They treated IP just like any other property. After garnering significant support particularly during the French Revolution and mostly in Continental Europe, the theory remains as the most prominent justification in copyright jurisprudence. In the field of patent law, as a German scholar remarked, it merely cannot be neglected totally[2]. But patent law contradicts with natural law notions in many ways. The following instances can be cited in this regard:
- Inventions have to go through an administrative procedure to obtain a patent rather than having an automatic right in their invention
- Parallel inventors lose their rights if someone else obtains a patent
- The time limited character of patents
- No invention is discrete and independent
Utilitarian rationale
Utilitarianism justifies that when inventors, authors or artists have an exclusive right to reproduce and sell their works, society benefits in consequences. This proposition is based on two assumptions. First, it assumes that such a right encourages inventors to invent and authors to write. Second, it presupposes that the greater the quantity of inventions and creative works eventually released into the public domain, the more the public benefits through economic or cultural enrichment, or enhanced quality of life. They conceptualise the award of IPRs as a kind of contract between the holder and the government on behalf of the citizenry.
Justifications based on consequences have inspired national IPR laws and policy making far more than rights based ones. For example, the original role of the United States patent and copyright systems were to implement Article 1 Section 8 of the U.S. Constitution which empowers Congress ‘to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.’ Henceforth US IPR law was not founded on natural rights justification of intellectual property ownership. Rather, the granting of exclusive rights for limited times was regarded as being beneficial for the country in terms of scientific and cultural progress. An exception was the French Law on Useful Discoveries and on Means for Securing the Property therein to the Authors of 1791. According to it, failure to recognize the property rights of inventors was ‘a violation of the rights of man’. However, it was fundamentally contradictory in that its underlying intent was thoroughly instrumentality. Firstly, right holders did not have to be inventors; they could also be importers of foreign inventions. Secondly, once a patent was awarded protected goods had to be manufactured in France. If not, the patent could be forfeited.
Contract rationale
Patents are sometimes conceptualized as a contract between the inventor and society. The terms of this conceptualized contract are as follows:
- the inventor agrees to disclose an invention to the public in a way that enables any person skilled in the art to which it pertains to reproduce it although he could also keep it a secret
- In return, society grants the inventor monopoly over the invention for a certain period of time
Hence disclosure can be considered as a quid pro quo of right to exclude.
Although the contract rationale is commonly cited, it is not entirely convincing. Many inventions can be reproduced by engineers simply by studying the product in question (reverse engineering). In other words, society does not need to grant patent to learn about such a invention. Where reverse engineering is impossible, the society has a reason to offer patents. Then the inventors have but little incentive to apply for them as they can keep the invention perpetually secret. Then they do not need patent protection.
The rationale has been critiqued by the US Supreme Court which wondered whether disclosure is still of value in the light of the highly developed art of drafting patents where as little as information is disclosed.[3] This criticism, however, is misplaced. Where the disclosure is not enabling, the law does not allow the grant of a patent. Patents granted in spite of this are not valid.
Reward Rationale
The great economists Smith and Mill regarded patents as a reward awarded to the inventor for contributing a new art to the society. This rationale has been discredited for the following reasons:
- First of all, inventions do not happen in a vacuum. They draw on the groundwork laid by others as knowledge is always incremental in nature. However, only the first inventor obtains the patent. It seems doubtful to endow this patent with any moral claim as a just reward.
- Secondly, the reward a patent offers may not be proportional to the social value of the invention. Many factors influence the profit that can be reaped from a patent, not least of all the amount of time that is lost in between obtaining a patent and having a marketable product that is accepted by consumers. If this time gap is too long, then it can be of little value.
Incentive rationale
The incentive rationale is one of the most prominent rationale for modern day patent law. It argues that patents are justified as an incentive for R&D. Without patents, others are free to copy an invention and compete with the inventor. This results in free riding. Patents correct this market failure and allow inventors to offset their costs for research and development, making invention a profitable business. In today’s economy, patents additionally signal to investors a firm’s innovative capacity and thus give an incentive for even greater investment.
Prospect theory
The prospective function of patents is another rationale for the system. Patents are sometimes obtained before the patentee has developed clear ideas about their exploitation. Patents provide the patentee with the necessary legal security to investigate market opportunities and search for venture capital. The patentee can also organize further research in a way that prevents the wasteful duplication of similar efforts by others. Many patents are merely the starting point of research leading to commercially more important inventions. They provide sufficient incentive for the patent holder himself to make further investments so as to maximize their value.
This theory can be credited with emphasizing on the exploitation of patents. It is particularly meritorious as to the search and exploitation for market opportunities. However, the theory is incorrect as to the progress of R&D. Research is an inherently chaotic progress. Several researchers compete on similar projects and contribute different ideas. The theory wrongly regards this aspect of research as wastage of resources. Organising research would require the foresight of knowing which way to venture – a foresight that is all the more improbable in a large field of research. Therefore, many scholars have argued against granting of patents in research sensitive areas. They favour a non-proprietary ‘innovation commons’ in areas such as software research or in the area of biotechnology particularly with respect to gene fragments that can be used as research tools. The Wrights’ airplane patent illustrates the problem involved in allowing patentees to organize research. In their quest to monopolise the airplane market, the Wright brothers used their patent on a feature of airplanes that is no longer in use, to impede, as much as possible, the efforts of inventions such as Curtiss to impove planes, almost driving Curtiss into bankruptcy.
Conclusion
As evident from this discussion, tailoring a healthy patent law framework is not an easy task. The framework is to be tailored in such a way that the benefits of the framework outweigh its costs. As to reiterate what I stated earlier, it is extremely difficult to determine an optimal level of protection for achieving an optimal allocation of resources towards inventive activities. The difficulty for policy makers in designing an optimal system is further compounded by the difficult tasks of ensuring that protection is both effective and at the same time not unduly restrictive of the freedoms of follow-on-innovators. In other words, patents are to be designed to balance conflicting aims and interests so as to effectively achieve certain public policy goals. Striking an optimum balance is, therefore, extremely important if public good is the ultimate measure of such optimality.
How can this be ensured? There are many answers. One among them is ‘patent working’ norms.
[1] Kinsella N.S, “Against Intellectual Property”, Vol. 15, no. 2, Journal of Libertarian Studies, (Spring 2001); Cullet. P, “Intellectual Property Protection and Sustainable Development” (2005), Lexis Nexis Butterworths: Delhi; Hestermeyer. H, “Human Rights and the WTO: The Case of Patents and Access to Medicines” (2007), Oxford University Press: Oxford.
[2] Fiscal and Financial Branch of the Department of Economic and Social Affairs, The Role of Patents in the Transfer of Technology to Developing Countries – Report of the Secretary General UN Doc E/3861/Rev 1,9 (1964)
[3] Brenner v. Manson 383 US 519 (1966) 533