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Nothing elicits more vigorous debate among free market types than the protection of
intellectual property. Opponents view IP as a monopoly conferred by the government,
which distorts economic incentives and damages the free functioning of the market.
Supporters, meanwhile, see IP as a form of property right that simply upholds claims to the
products of our own labor, and is, therefore a necessary component of any legal
framework, which defends open competition and individual rights.

Should we support intellectual property rights?

Shanker Singham, Director of the IEA’s International Trade and Competition Unit,
says YES

In order to better understand this issue, it is important to put it in its proper context. We
believe that wealth is created, when property rights are protected, trade is open and
liberal, and competition on merit is the organizing economic principle.

Whether you believe intellectual property rights are an important part of freer trade and freer
markets, turns on whether you believe intellectual property rights are granted by the
government (in this case to promote innovation) or whether they are a property right.

John Locke believed the mixing of one’s labor and one’s savings and resources led to the
property right. Following this logic, when the government grants a patent, it is merely
recognizing that property right as opposed to granting the right itself ex nihilo. That right
exists because of the labor that was applied to the resource belonging to the rights holder.

The intellectual property right – whether a trademark, copyright or especially a patent – is a

crucial part of making sure markets function competitively and efficiently. Indeed, in many
ways this property right is in even more need of protection because once lost, it cannot be
returned (unlike a piece of real property).

Some hard questions need to be asked about what patents have already been granted, and
about the excessive length of copyright protection – currently guaranteed during the lifetime
of the author and for 70 years after their death.
The IEA’s Head of Education Dr Steve Davies says NO:

Intellectual property (mainly patents and copyright) is an incoherent idea – unnecessary and
increasingly damaging. We should be trying to severely cut it back or even scrap it.

Intellectual property is not like other kinds of property, not least because it is time limited
(unlike property in land, for instance). If treated like other kinds of property it leads to
bizarre results such as perpetual copyright. In fact (as the law recognizes) patents and
copyrights are artificial rights, created by sovereign states. As such they can only be justified
by their utility.

A patent or copyright creates a time limited monopoly. This creates a monopoly rent for the
holder. Monopoly rents reduce general economic welfare so this requires a justification. The
justification is that without the incentive of the time-limited supernormal profits created by
the IP there would not be an incentive to create innovations and artistic works.

Despite much research over the last few years there is no clear evidence that strengthening
IP rights has led to higher innovation and creativity. In numerous periods and countries
where such protection was absent, levels of innovation have been historically higher – not
lower.

In addition, the form IP has taken over the last 30 years is increasingly harmful.
Accumulating evidence suggests that it actually reduces innovation. If there is a need for an
incentive for innovation this can be provided easily by things such as prizes, whether publicly
or privately funded.