OVER at the FFII's mailing lists, Geza found some new papers that summarise recent research work. He says "there's a brief article in the Atlantic, highlighting a working paper by Michele Boldrin and David Levine (Washington University in St. Louis), making the case (based on economic arguments) that our societies and economies would fare best if the patent system would be abolished completely."
Because policy proposals are better digested and metabolized when served in the form of small pills, here is our list of small reforms that could be easily implemented.
(1) Stop the rising tide that, since the early 1980s, is both extending the set of “things” that can be patented and shifting the legal and judicial balance more and more in favor of patent’s holders.
(2) Because competition fosters productivity growth, anti-trust and competition policies should be seen as a key tool to foster innovation. This is of particular relevance for high tech sectors, from software to bioengineering, to medical products and pharmaceuticals.
(3) Free trade is a key part of competition policies hence the role that WTO-WIPO-TRIPS play should be redefined to move away from the current neo-mercantilist approach toward free trade in goods and ideas. The aim here should be that of stopping the policy of exporting our intellectual policy laws towards other countries while adopting a policy of exporting free trade and competition in innovation. This seems an urgent goal because, within a couple of decades, the “balance of trade in ideas” between US+EU and Asia may easily reverse. At that point the temptation to engage in “mercantilism of ideas” may well affect the now developing Asian countries, leading to a general increase in IP protection worldwide.
(4) Cross industry variation in the importance of patents suggests we may want to start tailoring patent’s length and breadth to different sectorial needs. Substantial empirical work needs to be done to implement this properly, even if there already exists a vast legal literature pointing in this direction.
(5) Reversing the burden of proof: patents should be allowed only when monopoly power is justified by evidence about fixed costs and actual lack of appropriability. The operational model should be that of “regulated utilities”: patents to be awarded only when strictly needed on economic grounds. This requires reforming the USPO, which is urgently needed in any case.
(6) Prizes and competition. An interesting approach is that of operating to change the role that the NSF and the NIH play in fostering innovation. The basic goal, in this case, is that of reversing the principle according to which federally financed investigation can lead to private patents. As a first step we would advocating going back to the old rule according to which the results of federally subsidized research cannot lead to the creation of new private monopolies but should be available to all market participants. This reform would be particularly useful for the pharmaceutical industry.
(7) With regards to the latter, we advocate reforming pharmaceutical regulation to either treat stage II and III clinical trials as public goods (to be financed by NIH on a competitive basis) or by allowing the commercialization (at regulated prices equal to the economic costs) of drugs that satisfy the FDA requirements for safety even if they do not yet satisfy the current, over-demanding, requisites forproving efficacy. It is ensuring the efficacy—not the safety—of drugs that is most expensive, time consuming and difficult. All the usual mechanisms of ensuring the safety of drugs would remain firmly in place. While pharmaceutical companies would be requested to sell new drugs at “economic cost” until efficacy is proved, they could start selling at market prices after that. In this way, companies would face strong incentives to conduct or fund appropriate efficacy studies where they deem the potential market for such drugs to be large enough to bear the additional costs. At the same time this “progressive” approval system would give cures for rare diseases the fighting chance they currently do not have. This solution would substantially reduce the risks and cost of developing new drugs.
(8) If this progressive approval approach works for rare diseases, there is no reason is should not be adopted across the board. The current system favors a small number of blockbuster drugs that can be sold to millions of patients. The coming revolution in medicine will rely on carefully targeting hundreds or even thousands of drugs to the correct patients. But lawmakers must first usher in a new system that makes developing these precision treatments possible. The regulation reform we are suggesting would be a first important step to achieve such goal.