Van Lindberg on “Intellectual Property”

I’m reviewing Van Lindberg’s Intellectual Property and Open Source for Ars Technica. The first chapter is an introduction to the theoretical concepts that Lindberg describes as the “foundations of intellectual property law”—public goods, free-riding, market failure, and so forth. I’ve found several of the assertions in this chapter frustrating.

For example, on p. 8, Lindberg writes:

We want more knowledge (or more generally, more information) in society. As discussed above, however, normal market mechanisms do not provide incentives for individuals to create and share new knowledge

Italics mine. Now, this claim is simply untrue. Normal market mechanisms do, in fact, create incentives for individuals to create and share new knowledge. Mike Masnick has offered one excellent explanation of how they do so. See also Chris Sprigman and Jacob Loshin and the restaurant industry. Plainly, lots of new knowledge is created without the benefit of copyright, patent, or trade secret protection.

It’s likely that Lindberg is just being sloppy here, that he meant that markets do not provide sufficient incentives for creativity. This is a perfectly plausible view—indeed, it’s the mainstream view among scholars of patent and copyright policy. But even this weaker formulation is controversial. Boldrin and Levine, for example, are two respected economists who deny it. Even this weaker formulation, therefore, is too strong. Certainly many scholars (myself included) believe markets produce insufficient creative expression, but the point has certainly not been proven conclusively.

Then, on p. 18, Lindberg writes:

For the past 50 years—and especially the past 30—there has been a tide of stronger intellectual property protections across industries. This growth in IP has encouraged people to invest heavily in the development of new intellectual property, and has moved IP to the core of many business strategies. For most businesses in the United States, in fact, the intellectual property part of the business is the most valuable aspect of the business.

The first obvious point to make here is that correlation does not prove causation. It’s true that patent and copyright protections have been strengthened over the last half-century, and it’s equally true that innovation has occurred at a rapid pace. But there’s no particular reason to think that these developments are connected. Indeed, Bessen and Meurer have persuasively argued that outside the pharmaceutical industry, patents created a net negative incentive for invention during the 1990s. For industries such as IT where the patent system is poorly calibrated, patents appear to have made it less profitable than it otherwise would to “invest heavily in the development of new intellectual property”—the potential profits from obtaining patents of one’s own are swamped by the costs of defending against patent lawsuits from others.

It is certainly not the case that “the intellectual property part of the business is the most valuable aspect of the business.” Bessen and Meurer estimate that revenues attributable to patents during the 1990s averaged around $15 billion annually, almost all of which was in the pharmaceutical industry. In a $10 trillion economy, this is rounding error. I’m not aware of an analogous estimate for copyrights, but when we consider that the software industry (the majority of which is services companies that don’t rely heavily on copyright) enjoys revenues of less than $400 billion, and the movie and music industries have revenues in the tens of billions of dollars, the total value of all “intellectual property” activities in the economy cannot be much more than 5 percent of our $13 trillion economy.

It’s certainly true that innovative activity in general is a large part of many businesses. But it’s a category error to attribute all innovative activity to the copyright or patent systems. The market provides large positive incentives for innovative activities in most industries. In a few industries the patent and copyright systems seem to provide significant additional incentives for innovation, although in others they seem to be a net disincentive, albeit a small one.

Perhaps it’s not fair to pick on Lindberg for this. The chapter is a competent summary of the orthodox view of the “foundations” of patent and copyright law. His explanations closely track those you’ll find in most other treatises on the subject. But one reason I found the chapter disappointing is that this is a book aimed at open source developers. That audience, of all people, should be skeptical of claims that patent and copyright privileges are essential for the production of creative works. Plainly, the patent system has nothing to do with the success of Linux, Apache, and Firefox, and copyright has played a peripheral role at best. Lindberg acknowledges Richard Stallman’s views on the subject, and must be aware of other skeptical arguments that are staples of Slashdot discussions on the subject. Given the audience, I would have liked to see him at least give a serious consideration to some of those arguments, if for no other reason then simply to explain why he doesn’t agree with them. Yet the closest he gets is a single short paragraph on p. 16 where he mentions Stallman’s dislike of the term “intellectual property.”

Of course, the book is not designed to be a treatise on the economics of patent law, but a practical handbook for developers seeking to work within that system. So I certainly wouldn’t expect an in-depth treatment of the subject. But Lindberg took the time to explain concepts like “club goods” and “common pool goods” that don’t appear necessary for a developer wanting to learn the rules of the road of patent and copyright law. He could have cut some of that abstract discussion, replaced it with a more balanced discussion of competing views on “intellectual property,” and wound up with a book that arms his audience to better understand the shape of the contemporary copyright and patent debates.

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