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The following is the text spoken by OUT-LAW journalist Matthew Magee.
Hello and welcome to OUT-LAW Radio, where we hope to keep you up to date with the latest news and the most fascinating features from the world of technology law.
There is no time for the news on this week's packed edition, but make sure to check out OUT LAW.com, where you can read breaking technology law news throughout the week.
My name is Matthew Magee, and this week we talk to the economists who are wishing for a world without copyright and patents.
The world of intellectual property is a dynamic, fast changing place. Many of the digital economy's battle lines are drawn around the issues of copyright, patents and how much control over material its creators should have and how much its users should have.
But the debate tends to concentrate on the fringes of rights – Europe is currently tying itself in knots about whether the length of copyright in sound recordings should be doubled, we have discussed here whether software automatically reading out books counts as an infringement of audio rights.
What most people involved in the discussions agree, though, is that intellectual property is a sound concept, that the creators of work should have some rights over how it is used and should have a share of any money their creations earn.
Not Michele Boldrin and David Levine, though. They think the whole concept is bunk, and believe that culture would be richer and creators actually better off if there was no such thing as intellectual property.
So who are these two renegades? Pirate bay acolytes? File sharing enthusiasts? No – they are economists at Washington University in St Louis. They fervently believe that IP protection is bad for society and bad for business, and that a rights free for all would enrich our culture and financially penalise only those – such as big record labels or globe-trotting megastars – who can afford it.
Society decides to reward inventors to incentivise them. Innovation and invention are good for all of us, so IP exists to make sure people do it.
But in their book against intellectual monopoly Boldrin and Levine argue that what the protection actually does is make it harder and more expensive for people to innovate.
David Levine: Obviously we have one more incentive to invent if you think if you are going to get a monopoly. Nobody would dispute there but there is a less obvious effect and that is a system of patents or a system of copyright that makes it more difficult and more costly to invent, because inventions typically incorporate many different ideas. If all the ideas you need to incorporate are already patented or already copyrighted then it becomes very expensive to innovate as well. So it sort of operates on both sides of the ledger and you have to go out and you have to look at the data to see what actually happens and we you go out and you look at the data it seems like the two effects to a large extend or a wash, you don't really get more innovation not really get less innovation but what you do is you get less useful innovation because all the innovation you get you would have gotten anyway but it is much less useful because its monopolised and the price is high and there are few copies distributed and so forth and so on.
Boldrin and Levine are keen to explode a few myths about IP. Pharmaceutical companies are the biggest supporters of IP protection and their drugs only get invented because of strong protection, right? Maybe now, says Levine, but only because pharma innovators of times past fled countries with strong patent protection.
David Levine: There is also lots of anecdotal evidence we track for example the flight of the chemical industry from England and France in the late 19th century to Switzerland and Germany to escape from patents and of course all the innovation took place in a countries that either didn’t have patents or had weak patents, and it was completely stifled in countries that had strong patents and there is of course many examples like that.
The pharmaceutical industry is an interesting example because patents for drugs protect pure knowledge. If you invent a drug you get a 20 year period of monopoly in which to coin it in. After that, generic manufacturers wade in and your profits are slashed.
Actually, says Levine, we can observe a patent-free pharma industry at work in India, and there it takes generics five years to get their version of a drug into shops. So there is a kind of natural monopoly that rewards invention that we don't need to add to.
David Levine: In India they didn’t have drug patents and they have of course thousands of firms that are generic manufactures and legally they’re free to move in the moment that the secret is released in the Unites States, the moment the chemical formula is published, but it takes them on average five years after the product is introduced in the Unites States before they start marketing it. So you’d think, gee right off the bat they would be putting these things into production. It just doesn’t work that way. First you’ve got to look and see. You want to see is the product successful then you have to reverse-engineer it; you have to test your own version of it and so forth and so on. It is not instant. There’s a pretty big lead time at the end for the first manufacturer of the pharmaceutical product. Of course if it is true and if it is going to be a huge blockbuster money maker they move in a lot quicker but then again, you know, even a year with a huge blockbuster money maker is going to bring you lots of money.
A cornerstone of Boldrin and Levine's argument is that there are industries in which IP is essentially ignored. And, says Boldrin, businesses thrive.
Michele Boldrin: So the point is that when you look out there you will see that all these industries where people for a reason or another don’t patent anything. But they are nevertheless profitable and people make money. In the financial industry everybody imitates everybody else. And nevertheless year after year, decade after decade the evidence is people, not only people in the financial industry, innovate like crazy. The first mover typically makes a lot of money because that advantage, that story of imitating is not so easy to imitate. It is not so easy to overcome the advantage, but if you look around it is just enormous rate - that all agricultural development and until 30 years ago came round without patents. The whole fashion industry, that you like or not doesn’t matter, its the most creative industry around by force because every three months they are supposed to do something new; absolutely without patents in a sea of imitation and copying each other from the boots to the shoes to the skis to the tiles…these small entrepreneurs that are very creative, they all imitate each other.
It takes companies years to copy a drug, but what about the worlds of digital media. It takes seconds to copy an album's worth of new music. Will legalising copying of music not ruin the careers of every professional musician out there?
Michele Boldrin : You know people say “oh, my God if we take away copyright or reduce dramatically copyright on books and music then there is going to be all these imitated cheap copies and nobody will make any money anymore. Then the issue becomes: does the superstar need $15 million out of a release as opposed to a couple of millions to provide to get the incentive to do the release? And my impression is, you know, if they are going to do it for $2m they don’t need $20m, the guys that make two hundred thousand is not worth imitating.
David Levine: The thing to bear in mind in music is that the best business model of music is probably giving the recorded music away for free model and the way you get rich by giving music away for free is you sell the live performances which are in relatively limited supply. The music industry is just silly in the following sense: that copyright is effectively been gone in the music for five or more years now – there is just no way of keeping, there is no way of keeping the stuff off the internet anymore and it has killed the middlemen, they are obsolete. Why do we care about that? Movies are of course are a bit more complicated because movies are relatively more expensive. The thing to understand that most of these expensive movies are the huge payments to people, you know whose alternative jobs are being carpenters or something like that who earned tons of money because of copyright so the big actors won’t earn quite as many tons of money as they earn now but it is not a great social concern.
So what are the downsides of having IP protection? Boldrin and Levine list the prohibitive costs of medicines like anti-aids drugs whose high prices actually cost lives, the increased cost of doing business and the distorting effect that systemic abuses have. Patent trolls are people or companies that seek to assert overly broad patents to hold other companies actually making things to ransom.
Levine does not hold out much hope for the results of patent reform proposals.
David Levine: What is happening is kind of a struggle between the little patent trolls who want to tax everybody and the big companies who like to not be taxed by the patent trolls but will like to be free to sort of operate their own patents and suppress entry into their industries. You know, it is a little hard to see that sort of handing everything over to the big monopoly so that they can suppress entries is really a big improvement over the current patents system.
In all, Boldrin and Levine say that what we understand today as IP protection is a relatively new invention, and is just another form of protectionism. Like geographical protectionism and trade barriers before it, it will eventually, they say, disappear, to all of our benefit.
Michele Boldrin: One way of seeing what the good effect of free trade and demolition of tariff is, is that you allow people to compete and imitate. It is not only other producers from the other countries that are really…the imitating effect that these bring about and the possibility of using things produced in another country to make other things, different things here and so on, and so forth. Patents and copyrights are essentially the same thing. They prevent you from using other things; from imitating; from competing, by giving someone a monopoly power. So they are playing in a modern world in which the transmission of ideas is so much more important than the movement of physical objects. The same role that tariffs and trade protection was playing two centuries ago to prevent growth. Not by chance, as we pushed for the reduction of trade barriers for physical goods and commodities in some countries and only some countries the vast countries that have an advantage in that push for a dramatic increase of different trade barriers around the world called intellectual properties. You can say “Yeah, ok overall we gain as a country, we sell more patents, we receive more from royalties then the rest of the world. Very good, but very soon it will be the other way round or it will be a wash and then we will have an interest as a country to trade freely in this innovation and to let them be bought and sold and used without this monopoly restriction.
That's all we have time for this week, thanks for listening. Do you know of a technology law story? Is there something you think we should be covering? Do get in touch on radio@out-law.com. Make sure you tune in next week but for now, goodbye.