Research Shows: You Don't Need Patents To Disclose Information

from the people-figure-out-ways... dept

One of the things that we frequently hear in defense of patents (and to a lesser extent, copyrights) is that without that kind of protection, companies would never share information with one another about certain products, because it would be way too easy to simply copy the idea and run with it. The standard example is a case where an inventor or small company has an idea for a product, where they'd need a bigger company to manufacture it. We are told, without patents, how could the inventor possibly go to the manufacturer, without fear of completely losing the product. Similarly, in the drug business, where the key bit of information is the chemical formula, companies often insist that they absolutely need patents, or smaller companies won't bother to share the details of their research with others who can help manufacture the product.

Jerry Brito's Surprisingly Free podcast recently had a wonderful interview with Michael Burstein from Cardozo Law School, in which he talks about his recent research showing that a ton of information exchange occurs in the absence of intellectual property protection, and that inventors and companies figure out ways to protect themselves against someone just flat out copying their idea and running off with it. It's an area of research that is quite fascinating, because in the past, I'd thought that the argument about information sharing actually was one of the more compelling arguments for patents. Now... I'm beginning to question that assumption as well. The key thing that Burstein realized, was that information isn't quite as "clear cut" as people think it is, thus you can share some information without revealing all of the key points:

This article explains that, contrary to the conventional account of the disclosure paradox, information is not always nonexcludable and is not always a homogeneous asset. Instead, information is complex and multifaceted, subject to some inherent limitations but also manipulable by its holders. These characteristics give rise to a range of strategies for engaging in information exchange, of which intellectual property is only one. Information holders can use the characteristics of information itself as well as contractual and norms-based mechanisms and other legal or business strategies to achieve exchange. And examples drawn from fields as diverse and disparate as software and biotechnology show that entrepreneurs and inventors use these strategies alone or in combination to effectively link their ideas with capital and development skills, often without intellectual property playing a significant role in the transaction.

In other words, inventors and companies have already adapted to do this, even without relying on IP laws. Burstein argues that anyone relying on the claim that IP is needed to facilitate information exchange appears to be flat out wrong, based on his empirical research.

Intellectual property is therefore not necessary to promote robust markets for information and is, in fact, just as contingent and context-specific a solution to the paradox as the alternatives described here. At the very least, then, there is reason to doubt that commercialization theories founded upon information exchange provide a standalone justification for intellectual property. This article urges caution in policy interventions that seek to respond to the disclosure paradox and sets the stage for future empirical research to better understand the dynamics of information exchange strategies and the social welfare costs and benefits that may accompany them.

One example used in the report is how biotech firms share information without relying on intellectual property laws. They basically do a bit of a dance, in which they sign agreements and share bits of information with each other, which really seem to serve the purpose of testing whether each other is trustworthy. And, of course, because firms are involved in many, many transactions, there's a reputational issue at play here: a company that simply copies an idea presented to it by another will quickly find itself shut out of future opportunities to work with innovative companies. These are issues that patent system defenders and policymakers seem to rarely consider.

In some ways, this actually reminds me of the posts we've done on cargo cults and copying. Too many people seem to assume that it's easy to define and capture all of the information you need to copy someone else. If someone has a successful product, no problem, just make an exact replica of that product. But what we've seen over and over again is that there's superficial information, which can be easily copied, but most of the time there is also substantial tacit information which is not easy for a copycat to figure out without working closely with the original producer. This can be information into what kind of positioning worked with customers (and what failed). It can be as simple as experience with a unique way to calibrate a machine. There are all sorts of "little things" that those with experience have, that simply is not easy to easily capture from the outside. Thus, no matter how much superficial information is shared, it's not enough to make a really useful copy.

Filed Under: disclosure, surprisingly free