Q&A: Do patents help or hinder innovation?

In the run up to our Summit on the Global Agenda, we asked you to put your questions to David Kappos, from our Global Agenda Council on Intellectual Property System. Do patents help or hinder innovation?

Questions from our Facebook followers:

Wendy Castillo: Patents create incentive for innovation because they provide benefits to the monopolists for a period of time. How else could we promote research and innovation in high-cost sectors, such pharmaceuticals?

David Kappos: Innovation can also be promoted through other means, such as policies that allow companies easier access to a global talent base, or partnerships that facilitate cost-effective partnerships between companies with complementary strengths, or through government-funded university research that paves the way for development of cost-effective future innovations.

Questions from our Google+ followers:

Andrew Lyons: How about hindering health and survival in third world countries? Pharmaceutical patents exacerbate curable problems.

David Kappos: A 2004 paper found that “in 65 low- and middle-income countries, where 4 billion people live, patenting is rare for 319 products on the World Health Organization’s Model List of Essential Medicines. Only 17 essential medicines are patentable, although usually not actually patented.”

The paper went on: “Conciliation on patents would not change the abhorrent fact that one-third of people in developing countries have no access whatsoever to essential medicines, including the vast majority that are not patented and are manufactured as generics in developing countries.”

Scott Barnden: At the moment, instead of suing over patent infringement, a patent holder can inform someone of infringement and offer fair licensing terms, or take it to a third-party arbitrator to decide. If this were extended across the entire field of patents, couldn’t this drastically reform the sector?

David Kappos: Indeed, many patent holders choose to offer licences to others wishing to use their inventions, and some patent holders agree to arbitrate disputes. Both are examples of property owners (in this case, intellectual property) choosing to share access to their property.  Real property owners do this too, by offering rentals, timeshares and the like.  All of these sharing approaches are a way to maximize the use and benefit of a property.

However, fundamental in all property-rights systems (real property, personal property and intellectual property) is the concept of free choice on the part of the owner – ie the freedom to choose with whom to share the property, or whether to share it at all. In this regard, we accept that homeowners have the right to use their home and to refuse to let out any part of it to a third party. We understand that there are good reasons why homeowners may not want another person on their property, and we respect that choice. So, too, with intellectual property: the owner may choose not to grant rights to others, and to enjoy the property exclusively.

So while it is great to promote the sharing of property of all kinds, it is important to recognize that sharing may not always be desirable, and to have a system that is flexible enough to handle all modalities, whether sharing, exclusive access or arbitration.

Author: David Kappos at Cravath, Swaine & Moore and a member of the World Economic Forum’s Global Agenda Council on Intelectual Property System.