A recent story by the Planet Money team at NPR posed the question: what would happen to business and innovation if there were no patents?
For those who don’t follow the rise and flow of intellectual property law, this has been a trendy subject in recent years. Driven in large part by the complex — and aggressive — litigation between Apple, Google and Samsung over smart phone and software design, many smart people have posited that instead of protecting intellectual property and innovation in market economies, patents and other intellectual property protections have built fortresses around technology and impeded both creativity and economic growth.
There’s certainly an argument to be made for intellectual property reform. (For example, there’s a strange coincidence that copyright protections keep getting extended every time Mickey Mouse stands on the verge of entering the public domain.) But the Planet Money team skips that argument, probably because it would put to sleep their listeners, already bored by their overlong story of 15 minutes. Instead, they pose the much bigger question about no patents at all.
Patents are issued on machines and processes (trademarks and copyrights are on brand designs and creative products) and are issued by every major economy in the world. They provide limited protection to the innovator from unlicensed copying. These are especially important, as Planet Money notes, in software and pharmaceuticals, where development costs are high and production costs are low. Patents have been issued as early as the 15th century and are written into the U.S. Constitution specifically “to promote science and the useful arts”. So the fringe intellectuals who oppose patents, as quoted by Planet Money, believe that every advanced industrial economy that has provided patent protection has been wrong for more than 500 years.
That’s all well and good. But patent opponents are essentially arguing for a case that does not now exist. True, we do that routinely in political (and economic) debate. Try this, we say, it will be better my way. It’s hard to make solid economic arguments using only models because we can’t predict the future. But that’s what the opponents of patents are doing: Trust us.
Except there are several examples from history that the Planet Money team could have explored for the effect of patent-less economies. They simply ignored them. That’s too bad, because the debate over patents seems to come in waves of every 50 years or so. For example, the Netherlands specifically abandoned patents in 1869 but reinstated them in 1912. Germany didn’t adopt patents until 1877, Switzerland until 1907. How did this state of affairs affect these countries’ development? Planet Money doesn’t seem interested.
But probably the best example of a patent-less economy is the Soviet Union. From about 1922 until the collapse of communism 70 years later, the Soviet Union abolished all intellectual property protections. It was a socialist economy — the state owned everything, including ideas. Instead, the government issued “certificates of invention”, a sort of “Hero of Soviet Labor” for innovators that included a small stipend. That way we can measure creativity and innovation in the world’s largest socialist economy.
The results are stark. With the exception of sloped armor, a minor advance in antibiotics, and the AK-47 (for which I can find no record Mikhail Kalashnikov received a certificate of invention), the Soviet Union produced almost nothing new for 70 years. Virtually every major advance the nation built was stolen — aircraft (Tu-4), weapons (atomic and hydrogen bombs), computers and software (5e series, Agat, MOS) and spacecraft (Buran, see above). When the country opened up in the early 1990s, it was clear the advanced parts of the economy trailed the West by 30-40 years. The rest of the country was still living in the 19th century. Socialism was an economic calamity and had its worst effect on the innovative sector. Russia adopted intellectual property protections immediately.
That’s not to say the Soviets didn’t try. As the patent-less nations of the 19th century also did, Soviet innovators sought patent protection abroad for their innovations. The Soviet Union filed for 7,000 patents in the United States during the 20th century — comparable, one observer notes, to an advanced country like Belgium or Austria. (The observer fails to note both countries have a fraction of the Soviet Union’s population). But more importantly, there is little evidence that these patents led to commercialization. That is, despite the recognition of innovation by an advanced economy, the Soviet Union could not market the products — the results of these innovations — in advanced Western economies.
Perhaps Planet Money ignored the Soviet example because the effects of socialism were too distorting. Or maybe its results are so stark it simply pours cold water on the argument that patents hinder innovation and economic development. But it is important to look at this example in part because many patent opponents view them as market inhibitors. Yet in a socialist economy without patent inhibitions — indeed, in the worker’s paradise where the laborer owned the means of production — creativity and innovation died. Lesson learned?