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The Morality of Intellectual Property Rights

R&L: What significance do intellectual property rights have within a free market economy and what importance did the Founding Fathers place on intellectual property rights in the American economy?

Rogan: They are the underlying basis of a free market economy. The amazing thing about the Founders, aside from their wondrous gift of the Constitution, is that while they were in Philadelphia drafting that precious document they recognized the importance of intellectual property. When I give speeches on the subject, I tell people that if they look at Article I, Section 8, they will find the anticipation of a patent and trademark system. Freedom of religion is what drove the Founders’ ancestors from England to America. Clearly that freedom would have been of primary concern for the first Pilgrims. So when drawing up the blueprint for a limited government in the relatively short and limited document that became the United States Constitution, why would the Founders—before they even threw in free speech or free religion or even free press—take this obscure language about an obscure legal area and put it in this document? The answer is they knew that this country could never grow from an agrarian colony to a technological and economic giant if there was not within the system of law the incentive for inventors to invent and creators to create. The Founders recognized the protection of intellectual property rights as a seminal prerequisite to having a prosperous economy. So intellectual property rights are a fundamental underpinning of the free market economy.

R&L: What challenges face adequately protecting intellectual property rights in today’s marketplace?

Rogan: So much of what is created for today’s marketplace is digital content, including music, movies, and books. This means illegal copying and piracy of this material is the bane of our creative enterprises. Today, it is so easy with the Internet and a click of a mouse for anyone to make a million perfect copies of a CD recording, for example, distribute them around the world almost instantaneously, and undermine the business and economic value of the maker’s creativity. Preventing such illegal activity is today’s primary intellectual property protection challenge. There are operational challenges at the U.S. Patent and Trademark Office as well. Our Office is almost as old as the Constitution. We have been around since 1790, charged with the responsibility of protecting innovation and creativity. The good news is that the Founders, by including us in the Constitution, anticipated our longevity and expected us to be at the forefront of making sure innovation is vibrant and alive, and we are doing that. The bad news is that we have become so mired in bureaucracy that we are not always able to accomplish our mission in a timely and qualitative manner, and thus we could inadvertently end up actually hurting technology, innovation, and, therefore, the economy. The great challenge for me here as the director of the U.S. Patent and Trademark Office is to take this two hundred year old bureaucracy that still functions according to a two hundred year old, one-size-fits-all model and bring it into the 21st century e-commerce marketplace so that we can not only do our job faster and more efficiently, but also substantially increase the quality of what we do while bringing down the length of time it takes to get a patent or a trademark. We would like to see the latest technology introduced to the market as quickly as possible rather than having it sit on the shelf for three, four, five, or six years while we wade through an ever growing backlog.

R&L: Given that intellectual property rights create a “monopoly” in favor of the inventor or the author to obtain pecuniary gain through the use or sale of the invention or work, can this restriction be justified in the context of a free market economy?

Rogan: It can. I have heard law professors refer to patents, trademarks, or copyrights as monopolies. I take issue with that description. A patent, trademark, or copyright is not a monopoly at all. In a monopoly a person possesses the opportunity to essentially control the means of production and keep out all competitors, which is, for the most part, not conducive to a typical free market economy. When a person receives a patent, for example, that person does not wield a monopoly. In exchange for an individual’s creation, the government gives the inventor a piece of paper that affords him or her exclusivity over his or her invention for a limited period of time. But the government does not just issue that piece of paper to every applicant. The inventor must do two things first. The inventor has to come up with a patentable invention—something new, useful, non-obvious that will add to the quality of life. Second, the inventor must publish the information of how he or she created that product or process. This has great significance. Without the exclusivity assured through a patent system, an inventor would keep that technology hidden as a trade secret. The publishing requirement forces the inventor to describe in detail how to build the invention so that someone ordinarily skilled in the same art or science could replicate it. This allows any other inventor to examine the invention and consider how he or she could make changes that would constitute a patentable innovation. In other words, the publishing requirement not only shows any other inventor how an invention was created, but it provides other inventors with the incentive to improve it. As a result, technology keeps expanding while the quality of human life keeps improving. So a patent is not a monopoly, but rather a contract in which the public procures a great benefit in exchange for allowing the inventor to have exclusivity for a limited period of time.

R&L: What are the dangers of considering intellectual property rights to be less important than other, more tangible property rights?

Rogan: I think sometimes people feel that if someone builds a house, for instance, then because that is something that can be seen and touched, strong property rights should attach to that house. But if someone writes a book or invents a product, somehow people seem to consider it less worthy of receiving protection through property rights. To me, property is property whether it is real or personal, tangible or intangible, and strong property rights should attach regardless of the property’s form. Because the Internet makes stealing some types of property easy, some people feel this theft is justified. In the music industry, music sales are dropping off significantly because of the ease with which music can be freely—but illegally—downloaded. These same people would never think of going into Tower Records with a big overcoat on and start slipping CDs into their pockets as shoplifters. They would consider that clearly wrong. So we should not distinguish between property rights and allow the ease and popularity of stealing some types of property to serve as a justification for the theft.

R&L: In the absence of a greater moral sense regarding property rights, is it possible to prevent the kind of copyright infringement that occurs in the music industry?

Rogan: It will probably never be possible to totally prevent this infringement, just as it is impossible to totally prevent illegal drug sales or bank robberies or murder. The way that we must try as a civilized society to prevent crimes against both people and property is by helping people see a moral aspect of right and wrong with respect to these crimes. Many in the 1960s and 70s denigrated the concepts of absolute right and absolute wrong. But the more we move away from established notions of absolute right and absolute wrong, the higher the pathologies grow throughout all aspects of society. When the moral aspect of what is right and wrong is removed, acting illegally becomes easier. Now there are ways at least to reduce infringement on intellectual property, and those methods are being debated in Congress and around the globe. With respect to digital rights management and encryption, for example, technology manufacturers, content owners, and equipment manufacturers are all trying to solve this problem through negotiation. These negotiations seem to have the potential to offer a more effective solution than government intervention, because anything that Congress mandates as a technical solution probably would be obsolete within forty-eight hours of its promulgation.

R&L: Some contend that certain patents are immoral because they limit the public’s access to life saving products, such as pharmaceutical patents on medicines. What are the fallacies or merits of this contention?

Rogan: In 2002, research-based pharmaceutical companies invested nearly thirty-one billion dollars in research and development. On average, for every five thousand medicines tested, only five make it to clinical trials and only one of those is approved for patient use. As a result, the average cost of bringing one new medicine to market is approximately $500 million. Considering the time it takes to get FDA approval, pharmaceutical companies have a very narrow window of opportunity to recoup their costs during the lifetime of the patent (usually eleven to twelve years). Because of this, on average only three out of every ten prescription drugs generate enough revenue to meet or exceed average research and development costs. So based on those figures, the request to lift the patent on these drugs sends this message: “Thank you for spending billions of dollars on research and development. Thank you for trying out hundreds and hundreds of drugs that never quite made it. Thank you for keeping all those scientists working around the clock over the years to keep coming up with something profitable. But now that you have something that will allow you to make a profit, we want to allow your competitors, who have not had to invest a dime in research and development, to ignore your patent and produce the drug at a fraction of the cost, because we think that is the fair thing to do.” Obviously, asking pharmaceutical companies to stop functioning as private enterprises and become welfare organizations would obliterate the incentive to invent and create new drugs. Pharmaceutical companies, under the weight of research and development costs, all would shortly go bust. If we want to have a world where silver bullet medicines for major and minor illnesses become a thing of the past, all we need to do is prevent the people who invest in the creation of these medicines from having an opportunity to, for a limited period, recoup their costs and make a profit. I believe this would be extremely unwise.

R&L: You have spoken to this already, but I would like you to expand a bit. If some patents were removed or prohibited, what would be the effect on the American and international economies?

Rogan: It would be devastating. Every modern economic giant around the world is a country that has strong protections for intellectual property. It is easily tracked. Those countries that have the strongest intellectual property and private property rights protection also have the strongest democracies and the strongest economies. The less protection they have in these areas, the weaker they are.