Distribution, Competition, and Antitrust / Intellectual Property (IP) Law

A World Without Patents?

Patents are only for the old machine

(Photo credit: Alexandre Dulaunoy)

Planet Money’s recent podcast interviews two economists who advocate for the ultimate patent law reform: the abolition of patents.

They argue that patents inhibit innovation.  For example, the Wright Brothers supposedly secured a number of patents on their early airplane design — which didn’t work very well and which stalled (pun intended) airframe development in the U.S. for a number of years.  The industry migrated to France to avoid the U.S. patents.

What about pharma, you might ask (as did I?)  Are pharma companies really going to invest hundreds of millions of dollars into new drugs if there is no patent protection?

Even these economists seem to concede the answer is “no,” so they propose an alternative — the government would pay for initial R&D.  When the government finds a promising new molecule, it would put it out to bid to pharma companies.  The lowest bidder would pay for the expensive clinical trials but would then receive a royalty on all drug sales for some number of years.

It’s an interesting idea — although frankly it doesn’t sound that different from a patent.  Or at least it’s not much different from a patent associated with a duty to license at some fair and reasonable rate.

There’s another issue — not mentioned in the podcast: if the U.S. gets rid of patents, but other countries don’t, won’t that distort all the economics?  R&D may migrate elsewhere, and the supply and price of goods (those subject to foreign patents) in the U.S. may be adversely affected.

It’s an interesting idea to think about — but one that as a practical matter isn’t going to go anywhere.  At least not for many years.

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Comments

  1. Stephen Cipolla says:

    When what government finds a promising new molecule?

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