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Do Intellectual Property Rights Stifle Innovation?

A new study from the University of Chicago is providing compelling evidence that certain types of intellectual property rights work to stifle subsequent research on the copyrighted technology.

intellectual property rights stifle innovation

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“The goal of intellectual property rights — such as the patent system — is to provide incentives for the development of new technologies. However, in recent years many have expressed concerns that patents may be impeding innovation if patents on existing technologies hinder subsequent innovation,” said Heidi Williams, author of the study. “We currently have very little empirical evidence on whether this is a problem in practice.”

For the new research, the sequencing of the human genome by the public Human Genome Project, and by the private firm Celera, were investigated, and compared. The genes that were sequenced “first by Celera were covered by a contract law-based form of intellectual property, whereas genes sequenced first by the Human Genome Project were placed in the public domain.”

Even though the intellectual property rights only lasted for a maximum of two years, they allowed Celera to charge substantial fees for the data, “and required firms to negotiate licensing agreements with Celera for any resulting commercial discoveries.”

By gathering together a number of different datasets that had remained unused by previous researchers, “Williams was able to measure when genes were sequenced, which genes were held by Celera’s intellectual property, and what subsequent investments were made in scientific research and product development on each gene.”

When all of this is taken together, it becomes clear that there was “a persistent 20-30% reduction in subsequent scientific research and product development for those genes held by Celera’s intellectual property.” That’s a considerable blow to scientific advancement.

“My take-away from this evidence is that — at least in some contexts — intellectual property can have substantial costs in terms of hindering subsequent innovation,” Williams dotted, in the University of Chicago press release. “The fact that these costs were — in this context — ‘large enough to care about’ motivates wanting to better understand whether alternative policy tools could be used to achieve a better outcome. It isn’t clear that they can, although economists such as Michael Kremer have proposed some ideas on how they might. I think this is an exciting area for future work.”

Naturally, these findings are also important for clean technologies such as solar, wind, EVs, battery technology, energy-efficient lighting, and so on. These technologies are needed to avert the worst effects of global warming, and barriers to scientific advancement certainly aren’t helpful.

The new study was published in the Journal of Political Economy.

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Written By

James Ayre's background is predominantly in geopolitics and history, but he has an obsessive interest in pretty much everything. After an early life spent in the Imperial Free City of Dortmund, James followed the river Ruhr to Cofbuokheim, where he attended the University of Astnide. And where he also briefly considered entering the coal mining business. He currently writes for a living, on a broad variety of subjects, ranging from science, to politics, to military history, to renewable energy.


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