There’s no such thing as intellectual property

As the United States enters what is hopefully the final phase of the pandemic, the global outlook is darkening rapidly. Brazil has been suffering one of the world’s worst outbreaks all year, and over the past month much of the rest of South America, from Colombia to Argentina, has joined them. At the same time, India has become the hottest COVID hot spot on the planet, repeatedly breaking global single-country records for daily confirmed cases, which are widely understood to be understated by at least an order of magnitude from the true horrific picture. While America will shortly have more vaccine than it can deploy, the rest of the world is crying out in desperation for relief.

In response, there’s a burgeoning effort afoot to wrest control of the vaccines from Western and particularly American hands, and give them to other countries in more desperate need. A particular focus has landed on the patents owned by the pharmaceutical companies that developed the vaccines. Waive these, it is asserted, and the world will at least have a fighting chance at catching up to American vaccination levels; refuse to do so, and you’re not only putting profits before people, but sustaining the virus, giving it time to mutate further and undo all that we’ve achieved so far. The rejoinder from the pharmaceutical companies has been swift and forceful: Breaking their patents would deny them a proper return on their capital, and even threaten national security by giving Chinese and Russian competitors the opportunity to build on American ingenuity.

In this instance, both sides may well be wrong. Waiving patents wouldn’t do much to help vaccinate the globe — and might set back future biotechnological miracles. But that doesn’t mean that America’s historically aggressive approach to intellectual property — which we are doubling down on in the context of the epidemic — is right, not even in purely nationalistic terms.

Intellectual property protections aren’t the main thing standing in the way of getting the world vaccinated as quickly as possible. Before its recent outbreak, India was already exporting millions of vaccines to the rest of the world, had promised to ramp up to billions, and didn’t need to break any patents to do it. What’s turned that country from a confident vaccine exporter into a desperate importer is a shortage of components, many of which they do not make domestically, and some of which they would need to import from countries (like the United States) that have imposed export restrictions to sustain our own manufacturing capacity. Nor do patents prevent richer countries from footing the bill for poorer countries that genuinely cannot afford the purchase price; that’s why COVAX exists in the first place. What we need to do to relieve the situation is relax those restrictions — as we are now doing — and continue to ramp up capacity to produce both those components and the vaccines themselves.

Meanwhile, we’re already seeing remarkable follow-on developments to the initial COVID vaccine breakthroughs, most notably the first vaccine against malaria. Government funding will undoubtedly be needed to finance the production and distribution of vaccines like these that will be of the greatest benefit to poorer countries — but the innovation that made it possible was driven by the promise of return, and if that promise is welched on, it’s reasonable to fear that innovation could dry up with it.

But that doesn’t mean the only way to deliver those returns is though vigorous enforcement of American rules on intellectual property. In fact, both the theoretical and practical cases against very strong protections for intellectual property are quite compelling, and rooted in a simple but controversial truth: Intellectual property isn’t property at all.

Intellectual property lacks an essential characteristic of property as we normally understand it, a characteristic that is central to why we have property rights at all: natural scarcity. If I build a house, and you occupy it, I no longer have the house. If I have a lawnmower, and you take it, I no longer have a lawnmower. But if I write a book, and email you a copy, I still have my book to read, and so does everyone else who wants a copy. If I make a new kind of cake, and you, inspired, do the same, my cake doesn’t become any less tasty or filling. Giving you what I have doesn’t diminish what I have in any way.

Ah, but what if I wanted to sell my new cake — then if you were able to make it just as easily as I could, I’d face more competition, wouldn’t I? And facing that competition, my ability to make a profit would be diminished. So in that sense, I’d have lost something. This is true — but it actually reinforces the point that intellectual property isn’t property. After all, if I had no special knowledge of cake-making whatsoever, but had a monopoly license from the state to make cakes, then I’d make more profit than if there were no such license issued and everyone could freely make cakes. Would you call that license my property, something that it would be unjust for the state to take away without proper compensation? I doubt it. But even if you did, it should be clear that it is the license — a creation of the state — that you’d be calling the property, not whatever innovation (if any) the state cited as justification for granting it.

That’s what intellectual property really is, whether we’re talking about the copyright for a book or a patent for a vaccine: an exclusive license that the state issues specifically to allow the holder to earn monopoly profits. Once this is understood, it becomes easy to see how strong intellectual property protections can discourage innovation just as easily as they can encourage it, just as any other kind of monopoly does: the incentives of a monopolist are to maximize the rents they can extract from monopolies they already have, rather than pursue the much riskier and more expensive process of innovating. If we want to maximize innovation, then, we need to strike a balance: a system that adequately rewards risk-taking but that also adequately encourages the sharing of results that can spark further innovation.

So what about the issue of national competitiveness? If American innovations really were widely shared, how would America ever compete with countries with lower manufacturing costs, or keep our position at the frontier of innovation? Major competitors like China already don’t respect American IP in a host of areas, because they don’t think it’s in their interest, and America’s response has been to resort to greater secrecy (what you do when you don’t have adequate IP protection) as well as focusing our trade negotiating strategy on enforceable demands that China respect American IP. That would seem to vindicate the concerns of the pharmaceutical companies.

But this has the issue mostly backwards. Yes, simply giving away the store would be a mistake. But strong IP protections actually make it easier for American companies to outsource manufacturing without fear of losing their monopoly profits — and it’s that manufacturing capacity that is the real source of national competitiveness, not to mention providing the best laboratories for sparking further innovation. The ability to secure monopoly profits through intellectual property alone decouples the interests of our most innovative corporations from our national interests, which are served by making sure we have the factories and materials to produce high-value-added products, and that Americans, whether native-born or immigrant, have the training and expertise to run them.

America’s national competitiveness doesn’t and shouldn’t depend on keeping the world ignorant and unable to innovate on the basis of our innovations, any more than American health can be preserved in a world where the virus continues to rage unchecked beyond our borders. But if we actually care about that competitiveness — and we should — it’s not enough for us to come up with the best recipes. We need to have the best bakeries.


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