“IP Protection Should Be Strengthened to Stimulate Innovation and Commercialization”: Motion Denied

I was invited to participate in a two-day conference in Toronto, organized by the Conference Board of Canada. The conference’s title is Business Innovation Summit 2013: Innovation for the Corporation. I was asked to be on a panel debating the following hypothetical motion: “IP Protection Should Be Strengthened to Stimulate Innovation and Commercialization.”

Arguing for the motion were Sheldon Burshtein, a partner at Blake, Cassels & Graydon LLP, and  Mark Fleming, Director, Federal Affairs and Health Policy, Janssen Inc. Canada. Sam Trosow and I were invited to argue against it. And we did.

Before our debate began, the organizers distributed clickers and asked the audience to vote on the motion. 33% voted for it; 66% voted against. The audience was asked to vote against after the debate, but you’ll have to scroll down to see the results.

Here is my argument against the motion:

Ladies and Gentlemen,

My esteemed colleagues brought forward a motion to strengthen intellectual property protection in Canada. Doing so, they promise, would stimulate innovation. We will not only have one BlackBerrys; we will have Apples too. And Googles. And maybe we will even find a cure for cancer too. And Canadians will have better high-paying jobs. That’s wonderful, isn’t it? But what is the basis for those assertions?

65 years ago the US Congress asked the prominent economist Fritz Machlup to study the patent system. In his report, he wrote the following:

If we did not have a patent system, it would be irresponsible, on the basis of our present knowledge … to recommend instituting one. But since we have had a patent system for a long time, it would be irresponsible, on the basis of our present knowledge, to recommend abolishing it.

65 years later, we know a little more, but making conclusive recommendations either way is still difficult. But our job today is easier. We do have IP laws, so we don’t have to decide whether to create them from scratch; and nobody is currently proposing to abolish them. Today’s motion is to strengthen them, but what is the evidence that this is necessary or desirable?

We have heard arguments such as those made by my colleagues for the last 300 years, and for the most part we have always listened and obeyed. We do have patent laws, and copyrights, and trademarks laws. And all of these IP rights have expanded in term, and scope, and breadth, and reach. Not only in Canada, but globally. IP rights today have never been stronger. And still, my colleagues aren’t satisfied. Will they ever be satisfied? Will they ever come and say: That’s enough; our IP laws are fine. We don’t need stronger protection?”

Let me suggest that maybe the reason why we don’t have many more BlackBerrys, and that even globally, innovation seems to be sluggish, is NOT that we don’t have enough IP protection, but that we have too much of it.

Indeed, back in 1841, in a similar debate before the House of Commons in London, Lord Macaulay famously remarked that “copyright is a tax on readers for the purpose of giving a bounty to writers.” We all understand that sometimes innovators, or at least those who are asked to finance them, need a bounty, and we all agree to pay the tax of exclusive rights happily to create this bounty. But should we constantly increase it?

Now, you may ask, why shouldn’t we increase the bounty? What’s really wrong with strengthening IP protection? Can it do any harm?

Well, increasing the bounty can actually be harmful. IP protection is like red wine. With moderation, protecting IP can be healthy for innovation; excessive IP protection can kill it.

When my colleagues propose to strengthen IP protection,

• they propose is to give some firms greater power to prevent competition;
• they suggest that more ideas are blocked from others for longer times;
• they mean that some firms will be able to block the innovations of others;
• they propose that we enclose more and more knowledge and let some firms collect tolls for using it.

This is not a recipe for innovation. This is a sure prescription for stifling it.

Civilization is an open-source project. Humankind flourishes when ideas are free for all to use. Innovation happens when the best ideas can be used by the most brilliant people with as little restraints as possible. All learning starts with copying; improving begins with imitating. Stronger IP make all of it more difficult.

Strengthening IP protection means that, as Mark Lemely put it, we adopt a “Mother, may I?” regulatory regime for innovation. The more we strengthen IP protection, the more we rely on rules created by the government, and the greater is the power that we give private firms to be the gate-keepers of innovation. It means that the government and single actors can determine to course of innovation, instead of true innovators, the market, and the public.

True, sometimes the market may fail in generating sufficient incentives to innovate, so sometimes we need to intervene. But when we choose to intervene we have to do that extremely carefully and with the utmost moderation and humility.

We complain that Canadians firms have been too sluggish on innovation. It’s time that we begin realizing that stronger IP may not be the remedy, but actually the cause of our disease. For too long our focus on strengthening IP protection has led us to forget that the best stimulant of innovation is competition. We have overlooked the fact that like the sight of the gallows that focuses one’s mind, fierce competition is the best stimulant for innovation. If you don’t believe me, ask BlackBerry about its Z10.

For too long we have focused on strengthening IP. Maybe it’s time we start focusing on something new. Maybe it’s time we start:

• focusing on having stronger and more effective competition laws than the ones we have in Canada;
• focusing on removing many visible and invisible barriers to competition;
• reforming our IP laws and remove the instances that they actually choke innovation;

And when we think about those issues we should always be mindful of a very sad but simple truth: true innovators don’t have lobbyists. They don’t have the time, the money, or the energy for that. So when legacy industries complain that they need stronger protection we should be highly skeptical.

Very rarely is protectionism—whatever form it takes—a good recipe for innovation. Therefore, the burden of proof should be on those who seek stronger protection. It’s a very heavy burden to carry, and I’m afraid that those who support this motion have failed lifting it.

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At the end of the debate the audience was asked to vote again. The results were 26% for, 74% against. Motion denied (but shh!… don’t tell the USTR that this is how the Canadian audience voted).