Tyler Cowen points to an excellent article by James Surowiecki on why we should not force U.S. IP law on trading partners. I have been thinking about intellectual property lately (IP), though not about how it relates to trade, but I still agree with Surowiecki wholeheartedly. At the very least, new IP protections should only apply to patents and copy rights established after the change in laws. Making IP protections retroactive will only reduce the use of ideas without promoting any future invention.

Even in the U.S. I would guess that IP protections are too high by a wide margin, especially where software is concerned. Intellectual property rights exist to promote investment of resources into the creation and use of ideas. Low intellectual property right protections means that not enough investment will go into creating ideas. High intellectual property right protections means that right holders will attempt to extract all the value created from their idea and so too few ideas will be used. Clearly there should be some optimal level of protection.

In fields such as the software industry, bad patents are common. For example, Amazon.com owns a patent over one click shopping. It is not surprising that the US has higher than optimal IP protections or that the US pushes to force new trading partners to adopt higher IP protections. In developed countries, higher intellectual property right protections generally benefit concentrated and organized interests overdispersed and unorganized interests. The concentrated interests are usually well organized companies who have the resources to patent every patentable idea they have and enforce those patents. The dispersed interests are small and potential companies who want to use those ideas to create new businesses and the public at large. It is a well established result from group theory that concentrated interests have much greater power to lobby for legislative bodies than dispersed interests because the ratio of individual benefit to the cost of lobbying is much higher for concentrated interests. This is why I believe that IP protections are very likely too high in the US.

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