Thursday, August 7, 2008

Economics of Copyright And Patents

  • Innovation is good. Monopoly is bad.
  • Patents encourage both.
The argument is that inventors need the incentive of a patent to develop new products. Without patents and the prospect of monopoly profits, it is argued there would be less inventions and society would be worse off. Therefore, although monopoly is bad, patents are seen as the best solution.

Supporters of patents will say that although they may make monopoly profits on some successful patents, this is necessary to combat the losses on unsuccessful inventions which are never sold.

On the other hand critics will point to drug companies who can charge up to £7 for producing a drug that costs 10p to make. It is argued the high price of the drug prevents people from being able to take potentially life saving medicine. Surely, this is a good case to strip the monopoly power of the drugs company.

Is there Any Alternative to Patents?

Just because most people accept patents as the accepted norm, doesn't mean it is necessarily the best approach for the issue of invention.
One solution is for the government to pay inventors for successful patents and then release them into the public domain. In theory, everyone is happy.

The inventors get paid for the invention without the worry of dealing with commercial aspect. The government can then sell the patent at reasonable cost to prospective firms. This means there is the prospect of several firms using the patent. This could even increase the rate at which technology improves.

The problem is that:
  • Would a government body know which are the good patents to buy?
  • Would the government pay sufficient recompense for inventors to develop new products?

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