Three Quasi-Fallacies in the Conventional Understanding of Intellectual Property

In recent years the Supreme Court, Congress and the White House have taken actions designed to weaken patent rights. These actions track widely expressed views among legal and some economics scholars that cast doubt on the social value of robust intellectual property rights. These views rely on some combination of three core propositions: (i) IP rights raise entry barriers and increase costs to users; (ii) innovation often proceeds without IP rights; and (iii) IP rights usually or often entrench large incumbent firms. Using theoretical argument and empirical evidence, I show that each of these propositions is unlikely to be true in a significant set of commercially relevant circumstances. IP rights can reduce entry barriers and users’ costs relative to the organizational and transactional structures that markets would adopt without those rights. Environments that support innovation without IP rights typically rely on alternative mechanisms for securing exclusivity at some point in the relevant bundle of products and services, potentially imposing access costs that would not exist under a robust IP regime. With the exception of the pharmaceutical industry, large integrated incumbents in technology markets usually or often oppose expanding IP rights while the opposite is often true of unintegrated, R&D - intensive (and often smaller) firms that have difficulty funding the innovation and commercialization process without IP rights. These revised propositions cast doubt on the IP-skeptical presumptions that tend to dominate scholarly, policy and popular discussions of IP rights and drive support for legislative and judicial reforms to weaken IP rights