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Economists and IP owners should not be at war

James Nurton

Few groups escaped the acerbic tongue of Professor Sir Robin Jacob at his inaugural lecture as the Sir Hugh Laddie Chair in IP Law at University College London last week. Taking as his topic “IP Law: Keep Calm and Carry On” Jacob (a former patent and Court of Appeal judge in the UK) criticised (among others) lobbyists, politicians, journalists, Andrew Gowers, Professor Ian Hargreaves and the Court of Justice of the EU.

But he reserved his strongest comments for economists, particularly those (such as Michele Boldrin and David K Levine) who have questioned the economic value of the patent system, and even argued for the abolition of patents. Jacob said there is “a very real need for a study of the limits of what economics can tell us about IP” and added that properly evaluating IP value “may be beyond the analytical tools of economists” as it involves assessing complex matters such as patent validity as well as agreements that are by nature confidential.

More alarmingly, he argued that economists do not have just a theoretical influence but also shape competition policy, particularly in Europe where authorities have previously investigated the pharmaceutical industry and are rumoured to be looking at abuse in the mobile phone industry too. As Jacob reasonably said, it’s hard to think of an industry where innovation has been more astonishing and rapid than mobile telecoms, where fierce competition between companies has led to many new, improved products and lower costs. Patents and other IP rights may be part of the reason for that.

Yet, despite Jacob’s concerns, the influence of economists on IP policy seems to be growing. Many national IP offices now have chief economists – a trend we discussed when naming Carsten Fink of WIPO as one of the 50 most influential people in IP last year (economists might note the EPO is also advertising for a new one). WIPO is at the forefront of integrating economics research into IP with a lecture series and publications. Should IP practitioners be alarmed by this?

With respect to Sir Robin, it seems to me we should welcome these contributions, provided they are more serious than polemical. There are undoubtedly economists for whom, as Jacob said, “patents do not fit their world view” as they see them as monopolistic. But there are others such as Meir Pugatch who argue that IP rights promote competition. Let’s have the best of both.

Jacob mentioned in his speech that reviews such as those written by Gowers and Hargreaves typically call for “evidence-based” policy – only for governments to press ahead with policies on the basis of little or no evidence anyway. Regrettably, that’s true. As we look around the world at political debates over issues such as the EU unitary patent, the Shield Act in the US, FRAND, compulsory licensing, copyright reform and enforcement – many of which are already before senior lawmakers – feelings run high and are often based on rhetoric more than evidence. (See Gene Quinn’s excellent recent blog post Mark Cuban is an Idiot, Patents Do NOT Impede Innovation, and the comments it generated, for more detail on this.)

In this environment, it seems to me we need more not less economic research on the impact of IP rights – work planned by the UK IPO for example is promising. Or are IP owners scared of what the economists might say?


Article Comments

Sir Robin's concerns are well-founded.

As the world well-knows (to its great detriment - just ask the Cypriots), economists have proven themselves generally inept even in their core area of expertise, i.e. modelling, predicting and advising on the management of national and international economies.

Sir Robin rightly points out that the number of factors and variables involved in any analysis of the effectiveness of the IP system, and economists not only lack the knowledge and experience to understand these, they often bring to the task a set of preconceptions and perspectives from which they are ill-equipped to understand anything about the process of technical innovation.

The example of the so-called mobile 'patent wars' is absolutely a case in point. Why are various authorities expending so much effort (and public expense) investigating alleged anticompetitive behaviours in an industry which - despite some prominent disputes - is among the most innovative, dynamic and competitive the world has ever seen?

Anybody who stops to think about this will realise it makes no sense at all. There are surely other issues that could be more usefully investigated?


Mark Summerfield Mar 30, 2013

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