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A public policy blog from AEI
The Supreme Court is poised to take up the highly charged question of whether human genes can be patented. But another question could trump it: Has the field of genetics moved so far so fast that whatever the court decides, it has come too late to the issue?
A Myriad Genetics scientist preparing samples for DNA sequencing. The Supreme Court will hear a case on Monday, involving the company, on whether human genes can be patented.
The case, which will come before the court on Monday, involves patents held by Myriad Genetics on two human genes, which, when mutated, give a woman a high risk of getting breast or ovarian cancer. The patents give Myriad a monopoly on testing for these mutations, a highly lucrative business.
I will say that my own general views on patents are greatly informed by this 2012 paper from the St. Louis Fed, and I am not sure why I should make an exception for patenting human genes :
The case against patents can be summarized briefly: there is no empirical evidence that they serve to increase innovation and productivity, unless the latter is identified with the number of patents awarded – which, as evidence shows, has no correlation with measured productivity. This is at the root of the “patent puzzle”: in spite of the enormous increase in the number of patents and in the strength of their legal protection we have neither seen a dramatic acceleration in the rate of technological progress nor a major increase in the levels of R&D expenditure – in addition to the discussion in this paper, see Lerner  and literature therein.
As we shall see, there is strong evidence, instead, that patents have many negative consequences. Both of these observations, the evidence in support of which has grown steadily over time, are consistent with theories of innovation that emphasize competition and first-mover advantage as the main drivers of innovation and directly contradict “Schumpeterian” theories postulating that government granted monopolies are crucial in order to provide incentives for innovation.
The differing predictive and explanatory powers of the two alternative classes of models persist when attention is shifted to the historical evidence on the life-cycle of industries. The initial eruption of small and large innovations leading to the creation of a new industry – from chemicals to cars, from radio and TV to personal computers and investment banking – is seldom, if ever, born out of patent protection and is, instead, the fruits of highly competitive-cooperative environments.
It is only after the initial stages of explosive innovation and rampant growth end that mature industries turn toward the legal protection of patents, usually because their internal grow potential diminishes and the industry structure become concentrated.
A closer look at the historical and international evidence suggests that while weak patent systems may mildly increase innovation with limited side-effects, strong patent systems retard innovation with many negative side-effects. Both theoretically and empirically, the political economy of government operated patent systems indicates that weak legislation will generally evolve into a strong protection and that the political demand for stronger patent protection comes from old and stagnant industries and firms, not from new and innovative ones. Hence the best solution is to abolish patents entirely through strong constitutional measures and to find other legislative instruments, less open to lobbying and rent-seeking, to foster innovation whenever there is clear evidence that laissez-faire under-supplies it.
Laws don’t operate in a vacuum or in sterile economic models. They are subject to the vagaries of the political economy. With patents, it’s often a case where the benefits are narrow, the costs diffuse — which means the few benefit via lobbying, the majority suffer. Perhaps patent law should be stronger in business sectors where there are, as Alex Tabarrok explains, high “innovation-to-imitation costs” such as pharmaceuticals and weaker where costs are lower, such as software.(Tabarrok gives the example of some miracle drug versus one-click shopping.) But given the tendency of business to lobby for ever-stronger patents, there is a case for outright abolition.
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