That’s essentially the claim of this paper (via Techdirt) by Carliss Y. Baldwin and Eric von Hippel. Baldwin and von Hippel suggest that it is no longer clear that the ‘devil’s bargain’ (i.e. the granting of monopoly rights in order to incentives a firm to create) is on balance beneficial and fosters innovation:
The work in this paper and that of many others, suggests that this traditionally-struck ‘devil’s bargain’ may not be beneficial. First, there is increasing evidence that intellectual property protection does not increase innovation. As we saw in section 2.2, studies carried out over 40 years do not find that firm managers are inclined to increase their innovation investments due to the availability of patent grant protections. There are also many examples in which strong intellectual property rights may have impeded subsequent progress (Dosi, Marengo and Pasquali, 2006; Merges and Nelson, 1994). Indeed, recent empirical work has actually shown a negative relationship between patenting and subsequent progress in both biotechnology (Murray and Stern 2007) and software (Bessen and Meurer 2008). Second, the ascendent user and open collaborative innovation models that we have discussed in this paper mean that alternatives that are open by participants’ free choice — and to the economic benefit of those participants — are now ascendent alternatives to the traditional, closed producer innovation model. And openness, as we noted above, increases social welfare, other things equal.
I love counter intuitive research like this. I am not sure if I completely buy it, but I love that it problematizes a foundational assumption about the creation and subsequent growth of modern economies and technological advancements. It’s always good to challenge our intellectual sacred cows from time to time.
My first reaction is that they might be right, but I don’t think the observation that not all innovation is driven by the desire to monetize an invention invalidates or throws into serious question the value of patents and intellectual property rights. To be sure, many innovations that have come out of the private sector were the result of internal problem solving that leads to a marketable product. However, without the ability to patent and monopolize that technology for at least some period I wonder whether companies would be so quick to commercialize these internal innovations. It costs a significant amount of capital and resources to commercialize an asset. Regardless of the motive, the market may be deprived of some new technology because a company determines that it will cost too much for an uncertain return without patent protection to sell the product. Additionally, what’s to stop their competitors from adopting the technology to not only sell, but to solve what is likely a similar, internal problem?
I’ve got to go back and dig into the article more–lot’s to chew on with this topic.