Economy-Sapping Patent Trolls or the other Vultures

The question of whether patents promote or hinder economic progress is unresolved and probably divides the profession. Not always according to orthodox/heterodox lines, I might add. I'm a patent agnostic, as you would know from a few posts (see here or here), in particular because I'm skeptical about the role of property rights in general in promoting innovation, and because I tend to believe in the role of expanding demand in technological innovation.

My reading of the evidence is that patents delayed the development of the steamboat, for example, often considered the first major American contribution to technological progress. The thing is that the notion that patents stimulate innovation is based on a sort of hero or great man theory of history, the god like figure that invents a solution out of nothing and transforms the world. This does not describe the messy, incremental process of technological development that seems to be behind every economically significant innovation.

At any rate, two CEOs wrote this piece for the Wall Street Journal (yes, my favorite kind of people, in my most cherished news source). They do note that their: "companies [Cisco and JC Penney] alone have spent well more than a third of a billion dollars in the last five years defending [them]selves against cases brought by patent-assertion entities." Patent-assertion entities are companies that file for patents, and do not produce anything. Like the Vulture Hedge Funds, they make their money in litigation. I love the nickname, Patent Trolls. And this would be additional evidence on the limitations of the patent system.

South Centre hails Indian drug patent decision

We have discussed the role of property rights in the process of development. The recent Indian case is one in which a broader definition of property rights, one which may be seen by some conservative economists as a violation of patents held by corporations, may actually help the process of development.

From SOUTHNEWS, by Martin Khor:

"The ruling by the Supreme Court of India dismissing the petition from Novartis AG is a historic decision with positive global implications ... The Novartis AG application had claimed a patent for a new salt form (imatinib mesylate), a medicine for the treatment of chronic myeloid leukemia. Novartis sells this medicine in several countries under the brand name Glivec (Gleevec). The Indian patent office had rejected the patent application on the ground that the claimed new form was anticipated in a US patent of 1996 for the compound imatinib and that the new form did not enhance the therapeutic efficacy of the drug. The decision was upheld by the Indian Patents Appellate Board (IPAB).

...

The decision by the Supreme Court of India has significant positive global implications. It has effectively protected the leading role of India in supplying affordable medicines to other developing countries. The reaffirmation of the primacy of health and access to medicines as a right of citizens is particularly important for the international community when these rights are under significant threat under bilateral trade and investment agreements."

Property rights and the Industrial Revolution

I have discussed here a few times (here, here and here, for example; last one by Cesaratto) the role of institutions in the process of economic development. Within the mainstream the dominant view is that property rights are the essential institution for promoting growth. I only now came across the excellent paper by Julian Hoppit.* He says:

"Such views of the interrelated importance of property and the rule of law have led to major interpretations of the interplay of Britain’s economic, social and political histories, including that secure property rights were a vital foundation for the first industrial revolution. Yet property was often heavily taxed, frequently expropriated and, exceptionally, eradicated through redefinition. Such vulnerabilities did not diminish after the Glorious Revolution, they increased—mainly because parliament now met annually, had greater sovereign power than earlier monarchs and legislated prolifically regarding property. After 1688, Britain’s economic precocity rested less on the enhanced ‘security’ of property in any general sense of the word, much more on respect for parliament’s authority and its willingness to allow property to be alienated, most usually by particular interests claiming to act for the public or wider good. At times this required the reversal of commitments made only a generation earlier, raising doubts about central government’s credibility. Taken together, these uncertainties over property rights were sufficient for some to question whether property had a sound theoretical basis at all.
...
The scale of that expropriation was such, and the consequences so profound, as to undermine an important thesis that property rights became more secure after the Glorious Revolution, developed in a notable essay by Douglass North and Barry Weingast and now conventional amongst some ‘new institutional economists’."

Hoppit looks at the extensive expropriations in financial markets, after the South Sea Bubble, in heritable jurisdictions (offices granted by the Crown), and in the property of slaves. Very little is left of the new institutional argument.

* Julian Hoppit in "Compulsion, Compensation and Property Rights in Britain, 1688-1833," Past and Present, No. 210, Feb. 2011 (here; subscription required).