April 1, 2014 12:12PM

Does Strong IP Protection Create Innovation and Jobs?

The story that many people tell is that intellectual property protection creates innovation, and here in the U.S. our IP‐​based industries lead to many high‐​paying, export‐​oriented jobs. So, we need strong IP protection, and so does the rest of the world, and thus we push other countries to sign on to strong IP protection through trade negotiations.

But is this story true? Does strong IP protection really create innovation and jobs?

First up, jobs. Here’s the U.S. Chamber of Commerce:

IP is a clear indicator of the ingenuity of a country’s economy and the U.S. depends heavily on our IP for economic success; and IP accounts for 40 million U.S. jobs, 2/3 of all exports and $5.06 trillion in value.

The implication of this statement seems to be that, without our current level of IP protection, the U.S. would have 40 million fewer jobs, and only 1/3 as many exports. But that can’t be right, can it? If we had some lower level of IP protection, say, shorter copyright terms, perhaps fewer people would work in copyright‐​related industries. But they wouldn’t just starve. They would find something else to do. If government policy didn’t skew the incentives in a way that moves people into copyright‐​related jobs, they would find something just as productive, if not more so, to do. So, it may be true that 40 million people work in IP‐​related jobs. But IP doesn’t create the jobs; government policy pushes people towards these jobs, away from other jobs.

But what about innovation? Would there be any innovation at all without our existing levels of IP protection? Here’s Rebecca Strauss of CFR:

no one has a good grasp of whether the U.S. patent system is doing what it was intended to do — promote innovation.

… in practice, economists have not yet come to any empirically robust conclusions about whether this theory pans out or how well the U.S. patent system is performing.

Even the most elemental components of patents have no clear economic analysis backing them up, including how long patent rights should last or whether the patent right should be granted to whoever files the application first versus whoever invents it first. 

In the absence of definitive economic analysis, the trend in U.S. patent reform over the past thirty years has been to strengthen the status quo system, with powerful corporate lobbies driving the policy discussion.

This means that the deal has generally gotten sweeter for patent holders. Congress has extended the lifeterm of patents, and most drastically for copyright, which lasts nearly four times longer today than in 1800. Curiously, whenever Disney’s Mickey Mouse copyright is due to expire, the official copyright lifeterm is lengthened. 

Does strong IP protection lead to more innovation? The answer seems to be: We don’t know!

And I don’t know either. My point is not that we should adopt policy X or policy Y with regard to IP protection. Rather, what I think needs to happen is that we have an internal debate over appropriate levels of IP protection. U.S. government folks say they want a debate. But I don’t see it happening. What I see is the U.S. pushing our existing policies on others through trade agreements, even though it’s not at all clear that these policies are good ones.