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Intellectual Property is Not Property

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I was reading an article in the Sunday New York Times about the fashion industry trying to get Congress to pass laws outlawing knock-offs and it started me thinking. And don’t worry, once I get this off my chest I’ll start thinking about lead gen again, I promise.

I should note, first-off, that I think the worries of the fashion industry are ridiculous. Perhaps this is a guy’s point of view, but I get annoyed when the buttons fall off my Paul Stuart suits soon after I buy them. I expect the defining aspect of higher-priced goods to be quality, and I’m pretty sure that quality costs money to produce, justifying a higher price tag. But, that aside, the really interesting question raised by the article is about getting compensated for ideas.

Early on in my investing career I told an entrepreneur–re an argument about a NDA–“ideas aren’t worth anything, execution is the only thing that matters.” I was wrong, certainly. Ideas are worth something. But I was right about this: an idea does not make a business. Coming from consulting and advertising and venture capital and entrepreneurism, all businesses that rely on the constant production of ideas, I have come to the conclusion that you can make a living on producing ideas and you can make a living on taking an idea and executing it really well, but you can’t make a living on owning an idea.

Unless you’re a patent troll.

Which brings me back to what I was thinking when I read the article: is intellectual property worth protecting? I’m not going to go into the justice of it–except to say that ideas are not property in any sense that Locke would have recognized–I’m more interested in what is best for society.

The argument for intellectual property protection has historically been an economic one–“to promote the progress of science and useful arts“–not an ethical one. Do IP laws do this, promote the progress? Are consulting firms, advertising agencies, tech entrepreneurs, fashion designers and artists of all stripes at a disadvantage because they usually don’t have protection for their ideas? (not the expressions of their ideas, these often are protected, but the ideas themselves.)

When it comes to patents, supporters like to argue that the pharmaceutical industry would not create new life-saving drugs if they did not have patent protection. Is this true? It seems so intuitively correct: no effort would be made without a reward, it’s like a defining axiom of economics. But the flaw in this reasoning is the same flaw people often have when thinking about economics: that it’s about money.

Who has been more intellectually creative over the past century: pharmaceutical companies or physicists? I can’t answer, partly because there’s no metric for creativity, but also because no matter what the metric, the two groups are both pretty far off the right end of the chart. And what do physicists get for their creativity? Fame? How many physicists can most people name? (Okay, present company excluded, because you’re all a bunch of geeks.)

Physicists share knowledge because it’s their culture, they generate knowledge for non-monetary reasons. I believe that scientists do what they do because thinking of new things is a reward in itself. Physicists love to be creative; people love to be creative. You can’t buy creativity, you can only allow it. The old cliche that the best way to ruin an artist is to have people start paying for her work is a cliche because it has a grain of truth in it. What sense does it make to have a monetary reward (because that’s what a government-granted monopoly is) for an inherently non-monetary activity?

What would the pharmaceutical industry look like if there was no patent protection? I think it’s a question worthy of the rejection of preconceived notions. It would certainly be vastly different. But I would venture to guess that we would have just as many drugs; that our development path for new drugs would be faster, cheaper and more open; and that, in the end, we would all be much better off. All of us except for the pharma company executives, lawyers, lobbyists and shareholders, that is.