The Continuum of Excludability and the Limits of Patents
Author(s): Amy Kapczynski and Talha Syed
scholarship, patents are commonly understood as more efficient than
other approaches to innovation policy. Their primary ostensible
advantage is allocative: as a form of property rights, patents act as a
conduit between market signals and potential innovators, ostensibly
guiding investment toward inventions with the most social value.
Existing accounts recognize that, in practice, signals of social value
that patents facilitate may be attenuated because of, for example,
transaction costs and limits on the scope and length of patent rights.
We show here, however, a different problem with the conventional
allocative account. The appropriability mechanism patents rely on,
namely excludability, operates in asymmetrical ways for different kinds
of information goods. While scholars have noted that patent systems fail
to create goods whose value is difficult to appropriate in consumer
markets, this fact has not been fully appreciated in the literature, nor
have its implications for the standard justification for patents.
Through detailed examples in the health context we show that some kinds
of information goods will be much more difficult to exclude than others.
Importantly, there is no reason to expect that the ease of exclusion
will be correlated with social value. The analytic point that emerges is
generalizable: patents themselves can have distortive effects, stemming
from structural features of exclusion rights. Unlike the problem of
attenuation, the problem of asymmetric nonexcludability cannot be
resolved by increasing patent scope or length. Because excludability is
variable along a continuum, property rights in information, even if
formally perfected, and even assuming away conventional transaction
costs, will create asymmetrical demand for different kinds of
information goods. This argument provides an important new justification
for alternatives to patents such as government funding and gives us new
insights about how to allocate such funding. It also reinforces the
need for a comparative institutional approach to innovation policy, and
for incorporating into our debates currently unrecognized implications
that patents may have for values such as privacy and free speech.
Keywords: intellectual property, patents, information, public health, pharmaceuticals, checklist, statins, Demsetz, economics Accepted Paper Series