“[The Congress shall have the power] To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries … ”
– Article 1, Section 8, Paragraph 8 of the United States Constitution
Some say that it is “obscene” or “outrageous” to have life-saving technologies at our fingertips, which are expensive by reason of a patent monopoly. Patents involve monopolies which (admittedly) have some drawbacks to them, at least in the short term. Why, then, does society allow them? I will try to explain in this post.
The invention of new drugs (or anything else) requires a huge investment of time and money …
Suppose that someone tried to persuade you to invent a new drug (or other technology) to cure cancer. You would have to spend years (and millions of dollars) developing it, without any assurance that it would work. Even after you invented it, you would have to spend millions of dollars testing it, and going through the long process of getting it approved by the government bureaucracies that enforce public safety laws. If you invented the drug first (and went through the process of getting it approved and so forth), you could sell it for a profit; but your competitors could do the same, without having to pay you for the privilege of doing so. Moreover, they would actually have a major advantage over you when they did so, because they didn't have to throw all that money into trying to develop it, the way that you had to. Thus, they could make a higher profit from it than you do, because they can get similar revenues without all of those expenses from developing the product. Are you likely to try and invent this drug under these circumstances?
Relief representing the Patent Office at the Herbert C. Hoover Building
(the headquarters of the United States Department of Commerce)
… and without patent laws, most people would be waiting for someone else to do it instead
For most people, the answer would probably be “no” – most people wouldn't even do this if they were assured of a reward. (Just look at how many people are in other professions.) Rather, most people in this field would probably wait for somebody else to develop the drug, so that they could make more profits from something that they didn't have to pay to invent. The problem is, virtually everyone else would be doing the same thing; and not many people would be out there inventing these new drugs and technologies in the first place. Most of them would be waiting for someone else to do it for them. They would indeed be willing to produce certain drugs and technologies that already existed, but would have few (if any) incentives to invent new ones for humanity to use. Thus, the society's technological progress would slow to a virtual crawl; and the society's potential to invent new drugs would be left largely untapped.
Signboard of US Patent Office at their headquarters in Alexandria, Virginia
Pros and cons of patent monopolies (there are some of both)
The production of the older drugs and technologies would indeed be augmented to a large degree, including those that were invented more recently, because of no patent monopoly to make them more expensive. But there would be a massive price to pay for it, from the slowing (and almost stopping) of any technological progress, in such things as the invention of new drugs. Society would not realize the benefits of any technological breakthroughs that could save lives in the future. The short-term benefits might be significant (perhaps even saving some lives in the short run), but the long-term costs would outweigh them, by preventing life-saving drugs and technologies from being invented, and thus involving greater numbers of premature deaths over the long run. The patent monopoly thus actually prevents these things, by rewarding technological innovation enough to make it worth their while, and ensuring that a large amount of it will actually happen (something that the other system fails to actually do).
James Madison Building in Alexandria, Virginia – at the headquarters of the United States Patent and Trademark Office
What about the times when the monopoly company purchased the patent rights from others?
“But what about those times when the monopoly company didn't actually invent the drug,” you might be wondering, “but just purchased the patent rights from the original inventors?” The answer for this is that in these cases, their purchase did perform the necessary function of compensating the company that did invent them. This can be a helpful economic function, because the companies that hold these patent rights don't always have the necessary infrastructure to produce their monopoly product. Thus, their solution is sometimes to try and recover some of their losses by selling these rights to those who can actually produce them. They can still profit from being the inventors of these new drugs, but turn over the actual production to someone else, who may have the necessary infrastructure to do so. The selling of these rights can thus be either on a temporary or permanent basis, because the monopoly can be voluntarily sold to someone else if the original company is persuaded to allow it through sufficient rewards. It is true that the second company (or third, or fourth) may not have invented these drugs, but they did go through the trouble of compensating the ones that did (or compensating those who compensated them – extending this logic as many times as is necessary, to connect the current owner with the original owner). Thus, some sort of reward for this type of thing is necessary; and if the original company consents to it, the right to the patent monopoly would thus seem an appropriate reward for it.
Constitution of the United States, which includes a clause specifically authorizing patent laws
Patent monopolies are not meant to be permanent, and they always end in this country
It might also be worth noting that these patent monopolies are not meant to be permanent in this country. The United States Constitution actually says that the Congress shall have the power “To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries” (Source: Article 1, Section 8, Paragraph 8). The “exclusive right” (when not voluntarily alienated by a transfer, as noted previously) is thus meant to be secured “for limited times,” rather than perpetually. Once the inventors have been sufficiently rewarded for their hard work and ingenuity, either by the direct exercise of those rights or by voluntarily selling them to someone else, their patent monopoly should thus come to an end (and thus always does in this country). At this time, the price of these drugs then goes down dramatically, and the market competition in the production of these drugs is finally introduced – or at least increased. Sometimes, there may actually be competition even during the patent period, when the competitors are paying the patent-holders for the privilege of being allowed to compete with them. This is at the discretion of the patent-owner (as it should be), and thus happens only when the patent-owner has consented to it. Although it's not as competitive as a situation without a monopoly, it does introduce a certain amount of competition to these things, without abandoning the advantages of a good patent law. Thus, it should be allowed when the patent-owner has consented to it, although not otherwise. (If the crucial advantages of these patent laws are abandoned, temporary benefits are paid for dearly, as all life-saving innovations are either unrewarded or uninvented – neither of which incentivizes any further invention.)
United States Capitol
These kinds of innovations require the involvement of both government and the private sector
Of course, government involvement is always necessary to the proper functioning of patent laws. If there are legitimate roles for government intervention, patent laws would seem to be among them. But once patent laws are enacted and enforced, the private sector is effectively enticed to perform a function that it would seldom perform otherwise. Patent laws are thus a happy collaboration between government and business. In these circumstances, government involvement will unleash competitive forces that would seldom be there otherwise. Government intervention and private-sector competition are both necessary to make this technological innovation go faster. If you remove either one, this kind of innovation just doesn't happen as often as it otherwise would. Government bureaucracies are often good at doing basic research, but to put the entire burden of applied research on government throws away a significant amount of the help that we so desperately need. Moreover, basic research done in government labs is often funded (at least partially) by private companies, who are interested in the results. For example, some university research is partially funded (sometimes largely funded) by interested private companies; and the money does not always come entirely from tax dollars.
United States Capitol
Conclusion: Patent laws are still the best way to go, all things considered
Removing all patent laws would not be without some short-term gains, but it would seem that the long-term costs would outweigh them in the end. It might be aggravating that some life-saving technologies would be temporarily expensive for patent reasons – or are “right at our fingertips,” as these people sometimes put it. But as we think about the long-term goal of increased innovation, it would seem that there is no alternative to this plan that actually works in practice. The proposed alternatives never work as they're intended to, and may ultimately be somewhat shortsighted. If we want to have technological progress in medical advancements (or anything else), there is no way to speed it up that actually works better than patent laws. Rather, patent laws are the best way to go, and reward innovation in the medical field (not to mention every other field of technological endeavors).
Footnote to this blog post:
The United States Patent and Trademark Office is a part of the larger U. S. Department of Commerce. The United States Constitution says that the Congress shall have the power “To regulate commerce with foreign nations, and among the several states” (Source: Article 1, Section 8, Paragraph 3).
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