3.1. Transforming Intellectual Property (IP)

Intellectual Property (IP) is a system of government-created and -enforced exclusive rights (legally created monopolies) on certain aspects of creativity and innovation. They include e.g. patents, copyright, trademarks, trade secrets, database rights and other similar rights.

There are two standard justifications for IP: recognition and reward. The reward justification argues that IP protects the creator or innovator, by providing them a monopoly that is limited in time and scope, so they can benefit from the ability to recover their investment. After a time, the monopoly lapses, and the invention or creation becomes part of the public domain — i.e. the classical freedom of enterprise, where everything that is not forbidden is allowed, regains its normal place in the market. The recognition justification consists of the argument that IP recognises creators and inventors, and their contribution to society.

There are a number of problems with IP today.

First, there is the continued expansion of the monopoly rights. Copyrights, originally 18 years long, now last at least until 70 years after the death of the last contributing author (and for Disney a bit longer). Patents used to be for narrow, technical applications (“downstream” aspects of technology), but now apply ever more to “upstream” aspects of technology: methods (i.e. ideas), protocols, discoveries (e.g. in the field of biology), software and many other aspects that used to be non-patentable. In addition, the standards for "novelty" are sometimes laughable. To give a classic example, in Australia, after a patent law reform, someone managed to obtain a patent on the novel invention of the "wheel". Furthermore, new IP rights are invented on a continuous basis — examples include database rights, trade secrets, performers rights and the new secondary copyright for publishers in the draft Copyright Directive.

The public domain is under continuous attack from privateers.

Second, the link between the creator/innovator and the IP right is no longer functional. The full transferability of IP rights has the practical effect of allowing hoarding of monopoly rights to the place in the economic value chain where they produce the least benefit: with marketers and distributors. The actual creators/innovators typically get little to no benefit from or recognition for their contributions.

The consequences are seriously problematic. For example, while public money provides for most Research and Development (R&D) in developing new drugs, we see that the R&D budget of large pharmaceutical companies is a fraction of their marketing budgets, and most of their R&D budget is spent on researching "me-too" patents: patents on slightly different versions of drugs that already exist, in order to artificially extend their monopoly position (and charge higher prices). It is a classical example of socialising the cost and risk of developing new drugs, while privatising the benefits. The same is true for other innovations and research at universities and other research centres funded with public money. Far too often, the results of such publicly funded research are privatised, often in opaque and non-transparent ways, through the creation and transfer of IP rights to privately held spin-offs.

Third, IP rights have a number of negative effects on the economy and society. The rent they extract generates huge transfers of money to a limited number of corporate monopoly holders and their shareholders. This leads to a very regressive income distribution and drives economic inequality, as people who work pay rent to those who hold government-created monopolies on the proceeds of that work. In addition, in many countries IP monopolies enjoy tax exemptions or preferential treatment. This allows large multinationals to shift their profits and benefit from tax forum shopping, driving further inequality as these revenues are hoarded rather than taxed and redistributed for the public good.

IP rights, today, seem to significantly slow down innovation. Through IP claims, large established businesses use ever-growing monopoly rights to block access to their market to newcomers or competitors. Initiatives like the draft Copyright Directive allow copyright to be used as a way to censor content, further reducing the freedom of communication that the Internet originally promised.

In the discussion on the draft EU Copyright Directive, the monopoly holders of content (the entertainment industry) are fighting with the monopoly holders of the tech industry. But who defends the interests of consumers, citizens and creative people?