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Intellectual Property Rights | A Necessary Evil?
Why is innovation important?
Innovation is the motor that keeps the economy humming and the wheels of economic growth spinning. If innovation is so important, then it is also important that we have intellectual property rights (IPRs).
Paradoxical, yes. But, if a company’s innovation was not protected from competition, then why would there be an incentive to innovate? If Apple made the iPhone and everybody could copy it, then why would they make the iPhone in the first place?
Innovation is rewarded with the promise of long-term profits. Take the profits away, and you take the incentive away.
This is why we have IPRs.
An IPR gives the creator of innovation security from the state that they have the exclusive license to to profit from an idea.
But how else can we boost innovation? Are there any alternative models?
One example comes from 17th and 18th century Britain and France, where they would grant prizes to innovators in public competitions. Once innovators had collected their reward, the innovation was at the point made accessible to everyone.
This was indeed a great incentive for innovators. However, a downside was that innovations are often unforeseeable.
Another thing was that to judge innovation, you need to know what criteria you’ll be judging against. This, therefore, thins the competition.
Companies have also experimented with novel approaches. One idea is patent pools: an agreement among competing firms in the same industry to jointly control patents that they can all use. This is known as ‘coopetition’, a portmanteau of the words “cooperation” and “competition”. This has been used to try to lower the price of innovations.
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