How Powerful are Intellectual Property Rights?
| Author | Daniele Archibugi,Andrea Filippetti |
| DOI | http://doi.org/10.1111/j.1758-5899.2010.00076.x |
| Published date | 01 May 2011 |
| Date | 01 May 2011 |
How Powerful are Intellectual
Property Rights?
Daniele Archibugi and
Andrea Filippetti
Italian National Research Council and University of London, Birkbeck College
A response to ‘Intellectual Property, Dissemination of Innovation and Sustainable Development’
Claude Henry and Joseph E. Stiglitz*
In an inspiring article, Claude Henry and Joseph Stiglitz
address a core economic issue that has forcefully
re-emerged on the global policy agenda: what is the
suitable level of intellectual property rights (IPRs) that
should be granted to inventors and innovators? Invest-
ment in knowledge and innovation produces widespread
advantages in terms of economic development, produc-
tivity and welfare. It is therefore understandable that
public policies would attempt to induce the business
sector to innovate more. But the business sector is far
from being altruistic and the realm of knowledge is
dominated by high uncertainty: you never know if, what,
how and when you will find something. Profit-seeking
firms do invest in such an uncertain activity if they can
appropriate the returns from their investment. Without
IPRs, firms have fewer incentives to invest in generating
knowledge since they do not have the guarantee that
they will be able to exploit the results. But when IPRs
become too strong, the diffusion of knowledge is ham-
pered and innovation discouraged (Heller, 2008; Nelson,
1989). An ideal system of intellectual property should
therefore balance the need to provide sufficient incen-
tives to investors in innovation with the need to make
knowledge available to the society as a whole.
While we agree with Henry and Stiglitz in arguing that
a new system of incentives to innovate should be devel-
oped for the 21st century, and subscribe to most of their
proposals, we disagree with two of their underlying and
connected assumptions. The first is that knowledge is
costly to generate but it can be transferred from an
agent to another at zero or very limited costs. The sec-
ond is that IPRs can effectively protect the owners of
invention and innovation and prevent would-be imita-
tors. The first assumption no longer holds in the case of
technical knowledge (Dosi et al., 2006); the second
should be put in the appropriate context.
Most knowledge is useless to firms and organisations
that do not have the ability to absorb it. In order to
exploit knowledge successfully, potential users or com-
petitors have to invest enough time, effort and resources
to use it. In principle, IPRs protect the codified part of
knowledge but not the tacit component. Many cooking
recipes are freely available and everybody can afford a
cookbook with recipes from the five continents. But this
will not make good cooks of us all. In order to become
good cooks, people will need equipment, ingredients,
experience and talent. Industrial knowledge is not very
different from the expertise required in the kitchen. The
Arrow (1962) ‘paradox’ – if the potential buyers do not
know the content of the information, they cannot appreci-
ate its value, but if they know it, they do not need to buy
it any longer – does not hold true for industrial and inno-
vation-related knowledge.
1
As people involved in technol-
ogy transfer know very well, within the branches of the
same multinational corporation, even when there is much
interest and goodwill to transfer best-practice techniques
from one plant to another one, it takes a long time and a
lot of patience to achieve the same quality and efficiency.
If learning costs are so high, more attention should be
paid not just to the production of knowledge, but also to
what makes this knowledge exploitable for users.
This leads to the second issue, namely what IPRs can
effectively do in order to protect innovation and to pre-
vent competition. In most cases, the importance of IPRs
has been grossly exaggerated both by their supporters
and by their detractors. In fact, as Henry and Stiglitz
acknowledge, many companies would continue to gen-
erate innovations even in the absence of IPRs: the incen-
tive provided by IPRs is not the decisive factor in
influencing companies to innovate. On the other hand,
not even the strongest IPR regime manages to prevent
imitation. This is also linked to the fact that in a world
*Henry, C. and Stiglitz, J. E. (2010) ‘Intellectual Property,
Dissemination of Innovation and Sustainable Development’,
Global Policy. Vol. 1, No. 3, pp. 237–251.
DOI: 10.1111/j.1758-5899.2010.00048.x
Global Policy Volume 2 . Issue 2 . May 2011
Global Policy (2011) 2:2 doi: 10.1111/j.1758-5899.2010.00076.x ª2011 London School of Economics and Political Science and John Wiley & Sons Ltd.
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