Save the Whales! Abolish Patents! The Case of Green Technology

"Green" patents seem to be a no-brainer. Want to encourage technology? Give people monopolies for inventing things.
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Want to make green technology work? To revolutionize entertainment? Concerned about free speech? Want to reduce income inequality? To break the stranglehold of the multinationals over political power? To unleash a wave of innovation that will make the establishment of the Internet look like a calm summer day? A Utopian pipe dream. Yet all it takes is a majority vote in both houses of Congress and the signature of the President to abolish impediments to creativity left over from the medieval era: patents and copyrights. Sound absurd? Read on.

Abolishing so-called intellectual "property" (IP) won't solve all social ills -- yet perhaps it will save the whales. In a series of posts based on research with my co-author Michele Boldrin, we are tackling one issue at a time. Our first post looked at health care. Here we examine green technology, specifically technologies designed to mitigate global warming.

There are many solutions to the problem of global warming -- ignoring it is popular with the extreme right, and moving back to the stone age is of equal interest to the extreme left. For the rest of us improving technology seems like a good place to start. Even if dumping carbon dioxide in the atmosphere turns out not to lead to global warming, the ill-health effects of pollution aren't controversial.

So "green" patents seem to be a no-brainer. Want to encourage technology? Give people monopolies for inventing things. If you think that way, a headline here on the Huffington Post "China Surprising Leader In Green-Technology" may surprise you as much as it does the author. After all China isn't famous for the strong enforcement of patent laws. It isn't a surprise to Michele and me -- we've been beaten over the head time and again by empirical economists discovering that patents do not encourage innovation.

Patents do not lead to more innovation? In chapter 8 of our book Against Intellectual Monopoly we went through all the economic studies we could find: 22 studies by authors ranging from Arora to Zoz. We can sum them up by quoting Lerner's study of 150 years worth of evidence: "Consider, for instance, policy changes that strengthen patent protection...this evidence suggests that these policy changes did not spur innovation."

Why not? Ben Sann, a Washington University undergraduate found an example that clarifies the issue. HydroVenturi is a London-based energy company that was willing to invest $4 million in building a demonstration tidal power unit in the San Francisco bay. It never did. Why not? Because the patent rights to the technology are under dispute, and investors worried about prolonged litigation withdrew their support.

Patents are a double-edged sword. They reward inventors. But they also give existing rights holders the ability and incentive to interfere with other inventors creating enormous uncertainty -- "If we succeed will patent trolls come out of the woodwork to sue us?"

In the case of carbon emissions, the problem is worse. Rich countries produce a lot, and big countries such as China and India are quickly becoming richer. Carbon pollution, however, does not respect international boundaries. So you would think that the goal of countries -- such as ours -- that are already rich, would be to make it as easy as possible for poorer countries to reduce their carbon emissions. Are you surprised then that on June 10, 2009 the United States House of Representatives "voted overwhelmingly to establish new U.S. policy that will oppose any global climate change treaty that weakens the IP rights of American 'green technology'"? That Jonathan Pershing - deputy special envoy for climate change at the US Department of State - says unequivocally that we will will charge poor countries like Bolivia all the market can bear for our green patents?

We can put this "beggar they neighbor" policy into perspective by describing a study published in the prestigious American Economic Review by Chaudhuri, Goldberg and Jia about the antibiotic quinolones. They estimate that every dollar we squeeze out of impoverished Indian consumers by forcing our patent system on them and driving up the price of drugs costs them seven dollars. Think of this in the context of global warming. Who pays the seven dollars then? The cost of global warming isn't just paid by the Indians -- it's paid by all of us. If we have to pay inventors seven dollars for every dollar worth of global warming reduction...I'm sure Siberia will be a nice place to live some day.

If you are interested in patents and green technology there is an entire blog dedicated to the subject. Here you can find, well, not so much innovation, as endless reports of the lawsuits they generate..."P3 alleged that UPM's plug-in energy meters [which allows consumers to determine how much energy particular appliances are using] infringe U.S. Patent No. 6,095,850." We also find out useful facts. How many patents is the integrated gasification combine cycle -- essential for clean coal technology -- wrapped in? Answer: 342 patents.

We conclude by quoting our colleague Paul David, economics professor from Stanford advising an EU commission on the environment. "Patents can 'inhibit' the spread of equipment to developing countries that are most affected by water shortages and other symptoms of climate change, [David] said: 'What we need is the freer moving of technology knowledge."

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