Lab d3: Copyright, patent laws and innovation

Copyright, Patent Laws And Innovation

Since OboxPlanet has no states, there are no intellectual property rights. After all, copyright and patent laws are in fact a monopoly privilege that states give to individuals and companies by keeping others from using certain ideas. The consequence is that business models have no monopoly protection but must keep innovating at a much faster rate. What we invent in 10 years, they come up with in one year or two. Technology on OboxPlanet is ahead by decades or more compared to the earth.

Wait a minute, how can that be? How can they innovate faster when the whole justification for IP-laws is the fostering of innovation? how can businesses prosper without IP-protections? 

For one thing, there is no agreement on Earth that IP-protection has an overall positive impact on innovation, which is all the more surprising given the grave restrictions and legal battles they cause. 

Still, the prima facie argument that state protection for innovators fosters innovation is so compelling that advocates will not be dissuaded by a lack of concrete proof. The perpetual question they pose is:

How, for example, would authors, the pharmaceutical industry, and software companies recover their costs without such protection?

Below are a few preliminary ideas, rough sketches of potential business models that address these question and that we could probably encounter on the OblxPlanet. 

The essence of entrepreneurship is precisely to discover a viable and lucrative business model, going beyond mere product ideas.  Claiming that the state must protect intellectual property to provide a profitable business model turns the question on it’s head. We can count on entrepreneurs to come up with much more and better ideas than the ones below. 

But how can businesses prosper without IP-protections? How would f.ex. authors, the pharma industry and software companies recoup their costs?

Let’s start with copyright and use an example by Stephan Kinsella, a pioneer against intellectual property. Let’s say J.K Rowling lived on OboxPlanet, and she wrote her first Harry Potter out of passion, just like she did on earth. It became a success and very soon, cheap copies appeared. Rowling’s revenues for this first book were initially smaller than on earth. Then again, they must have been considerable, because copiers only copy books that sell well. And then, while cheap copies make an author better known, this may lead to more sales of her original book. The same is true for film productions. We would expect that several movie versions would be produced, mostly without compensating Rowling, but the one she endorsed was more popular with her fans which allowed the producer to reward her handsomely. Then, before Rowling published the second book, she did what many authors do on OboxPlanet. She told her fans “I am going to release it as soon as I have 100 000 orders for the book for 10 Dollars”. And these 100 000 books were not all she sold of her second novel. People on OboxPlanet are wealthy and wealth tends to foster “brand-conscious”. They happily pay 10 Dollars for Rowling’s “original” instead of saving a few bucks on a cheap copy.

Compare this to earth. Today, artists fight a losing battle against the ever-easier copying-techniques. It is not only futile but at the same time incredibly destructive. The worst aspect is that not only the concrete artistic work is protected but the whole concept, the character, the core idea of the story. Many characters can’t reach their potential and end tragically, like James Bond.

What about patents? How could innovative firms survive?

What can history teach us? On earth, many countries had no patent protections while their industries flourished disproportionately. One example is the American aviation industry. For a decade after the Wright brothers sued all potential competitors, the European Aviation producers outperformed the American market by leaps and bounds. Today, the fashion and restaurant business have no patent protection and they are fiercely competitive and innovative.

One important strategy for success on OboxPlanet is the “surprise”, “first-mover” advantage. On earth, this mechanism is all but destroyed by the logic of patent laws. Patent laws require the inventor to disclose his invention, for everybody to see what he must not copy. On OboxPlanet, firms keep inventions secret and flood the market before the competition can catch up. And just like with books, copycats can and will not copy everything but only the successful things. And for things to be successful, the first firm must have sold a lot. And then there is the branding factor. Harley-copies just are not the same as the original.

Another strategy is that production firms work with their future customers in financing and developing products. Boeing could work with Delta, have Delta finance part of the developing costs and get the fixed orders for 100 planes at a great discount. The same idea can be applied for software and even medication.

And then there is the pharma industry. Today, the problem is the huge licensing costs for new medications. Estimates vary, but the gross dimension is something like 1:10. This means that the cost of coming up with the chemical components, the drug itself, takes but a few months and takes one tenth of the company’s budget. On OboxPlanet, pharmaceutical research and production firms are separated from the licensing and marketing business, with dramatic consequences.

Pharma production companies are offering a stream of new pills and powders every year, many times the numbers on earth. Distribution companies test these substances and decide on how to present them on the market. They decide what problem the medication is supposed to address, and they inform their customers on the benefits and risks. They want as many products on the market and as quickly as possible because that is their business. It also drives costs down dramatically, often lower than 10% of the costs on earth.

Without state licensing agencies, everybody on OboxPlanet knows that all products have potential benefits and potential risks and that here is no 100% certainty either way. What consumer want is maximum transparency as to what is known. Distributors publish this information in the most consumer-friendly form. There are scales of benefits and risks, from 1 through 10. And there are lots of consumer protection and medical advice agencies which help consumers make the choice that best fits their risk profile. And once again, competition keeps everybody honest and on their toes.

Much more and cheaper medication which hits the market years earlier than on earth leads to much faster medical research. On OboxPlanet, all the major plagues we have are treatable: Parkinson, cancer, diabetes, overweight, dementia…

This last perspective is the positive illustration of the destructive effects patent laws have on earth. And now we could cite examples on earth where literally millions of people have suffered and died unnecessarily because of patent restrictions and health regulations. Instead, we want to end on a cheerful note and a call to action.

Patent and Copyright are entrenched with political and economic interests to the point where they are treated like a holy cow, like the state itself. We hope we could show you that things would work quite well, in fact much better, without them. And we can abolish them anytime. Even easier than the state

What experiences on Earth, past and present, help us understand life on the OboxPlanet?

Do patents and copyright truly encourage and foster scientific and material progress? This question has been extensively debated, as there are significant economic and political interests involved in preserving and expanding such rights. However, the conclusive evidence on this matter remains elusive.

In their highly accessible book “Against Intellectual Monopoly,” the authors, Michele Boldrin and David K. Levine, set out once more to justify legal restrictions but arrive at an opposing conclusion. They present compelling historical evidence and conduct thorough economic analysis to support their arguments, proposing that innovation and progress can flourish even in the absence of intellectual property monopolies.

Now it’s your turn:

Can you imagine what it would mean if technological progress were two, five or ten times faster?

Things we could learn and implement from the OboxPlanet:

Abolish copyright. It is a dead letter anyway; all it produces is destruction and frustration and the delay of businesses to adjust to this fact.

Abolish all patent laws. They have an unimaginably destructive effect, notably in the medical field. They take decades from potential life expectancy and prolong unnecessary suffering.