The Agenda

Intellectual Property: Software vs. Molecular Mechanics

Gordon Crovitz makes the case against software and business method patents in the Wall Street Journal:

In software, innovations build on one another so seamlessly there is no way to follow them. There is no national registry of software. Developers and engineers can’t track who claims patents to what processes. In contrast, drug researchers consult a publication called the Orange Book that lists all the patents for pharmaceuticals, enabling them to avoid infringements.

A system of property rights is flawed if no one can know what’s protected. That’s what happens when the government grants 20-year patents for vague software ideas in exchange for making the innovation public. In a recent academic paper, George Mason researchers Eli Dourado and Alex Tabarrok argued that the system of “broad and fuzzy” software patents “reduces the potency of search and defeats one of the key arguments for patents, the dissemination of information about innovation.”

He goes on to describe software patents as “a litigation tax on new technology” that undermines innovation, and I’m inclined to agree.

Yet elsewhere, in City Journal, Peter Huber, the prolific author (most recently of The Cure in the Code: How 20th Century Law Is Undermining 21st Century Medicine) and polymath, calls for granting intellectual property rights to individuals and entities that figure out the molecular mechanics of a particular disease. The Supreme Court has ruled that patents can’t lay claim to abstract ideas or natural phenomena. Rather, patents apply to proper inventions. The trouble, in Huber’s view, is that it is difficult to disentangle biological know-how from the invention of new cures:

But very often, much of the cost of inventing the patentable cure is incurred working out the non-patentable molecular mechanics of the disease because all innovation in molecular medicine must in some way mimic or mirror molecular mechanisms of action already invented by nature. And spurred by the enormous promise of precisely targeted molecular medicine, a substantial part of our health-care economy is now engaged in working out the molecular mechanics of diseases. Washington is funding genomic research projects. Drug companies are heavily involved, joined by a rapidly growing number of diagnostic service companies. Doctors are gathering reams of new molecular data, patient by patient. Hospitals are mining their records for internal use and for sale to outsiders. Device manufacturers are racing to provide molecular diagnostic capabilities directly to consumers. Private insurance companies are mining the information they receive when claims are filed. And there are many signs that Washington intends to take charge of all of the above, as it tightens its grip on diagnostic devices and tests, what doctors diagnose, which diagnoses insurers cover at what price, and how the information acquired is distributed and used.

The patentability of genes is thus only one piece of a much broader debate about who will own and control the torrents of information that we have recently begun to extract from the most free, fecund, competitive, dynamic, intelligent, and valuable repository of know-how on the planet—life itself. That the private sector is already actively engaged in the extraction and analysis is a promising sign, but getting it fully engaged will require robust intellectual property rights, framed for a unique environment in which every fundamentally new invention must be anchored in a new understanding of some aspect of molecular biology. Individual gene patents are out of the picture now, but other forms of intellectual property already provide some protection. We should reaffirm and expand them. And we should view Washington’s plans to take charge instead for what they are: the most ambitious attempt to control the flow of information that the world has ever seen.

And Huber has a model for the kind of intellectual property protection he has in mind:

As the Supreme Court has recognized, a property right that curtails the use of basic science may foreclose too much innovation by others later on. The discovery of a promising target, for example, shouldn’t be allowed to halt all competitive development of molecules that can detect or modulate it. Instead, we need rights that will simultaneously promote private investment in the expensive process of reverse-engineering nature and the broad distribution of the know-how thus acquired, so as to launch a broad range of follow-up research and innovation and allow front-end costs to be spread efficiently across future beneficiaries.

Models for property rights framed to strike such a balance already exist. As it happens, federal law already grants drug companies a copyright of sorts: a “data exclusivity” right that, for periods up to 12 years, bars the manufacturers of generic drugs from hitching a free ride through the FDA by citing the successful clinical trials already conducted by the pioneer. Data exclusivity rights could easily be extended to cover the development of biological know-how as well, enabling the market to spread the cost of developing such knowledge across the broad base of future beneficiaries. The rights should be narrowly tailored to specific diseases, but they should also last a long time.

This level of protection will, in Huber’s view, make it more likely that useful knowledge will be widely shared rather; without it, researchers will be more inclined to treat their discoveries and databases as trade secrets. I can’t really speak to whether Huber is right that biological know-how shouldn’t be treated as a commons. One important question is whether the knowledge he addresses is “indexable.” Tim Lee and Christina Mulligan have argued that the big problem with software patents is that they don’t scale:

In principle, a software developer starting a new project faces a similar problem. He needs to know if the software he is planning to create will accidentally infringe on anyone’s patents. But whereas looking up who holds claims to a particular piece of land is easy, finding out who, if anyone, holds patents related to a particular piece of software is difficult and expensive. It’s so difficult, in fact, that the vast majority of software developers don’t even try.

If biological discoveries and databases can be coherently indexed, perhaps extending intellectual property protection won’t do much harm. If they can’t, there is a real risk that we will recapitulate the sad story of software patents and the litigation explosion they’ve sparked.