Intellectual property, not monopoly

"The copyright and patent laws we have today look more like intellectual monopoly than intellectual property," wrote Brink Lindsey and Steven Teles in their recent book about the US economy. Concerns about overprotection of intellectual property acting as a barrier to innovation and its diffusion are not new. But they have gained greater salience now that knowledge has emerged as a dominant driver of economic activity and competitive advantage.

Digital technologies have enabled the emergence of an "intangible economy", based on soft assets like algorithms and lines of code, rather than physical assets like buildings and machinery. In this environment, intellectual property rules can now make or break business models and reshape societies, as they determine how economic gains are shared.

Yet the main features of today's IP regime were established for a very different economy. Patent rules, for example, reflect the long-held assumption that strong protection provides an essential incentive for businesses to pursue innovation. In fact, recent studies by Petra Moser and Heidi Williams, among others, find little evidence that patents boost innovation. On the contrary, because they lock in incumbents' advantages and drive up the costs of new technology, such protections are associated with less new or follow-on innovation, weaker diffusion, and increased market concentration. This has contributed to growing monopoly power, slowing productivity growth, and rising inequality in many economies over the past couple of decades.