Following the recent Supreme Court judgment rejecting Novartis’ claim for a patent on a major cancer drug there has been impassioned debate about patents vs. patients and profits over people.
Emotive arguments are inevitable when health care is involved. But this case has highlighted something far more fundamental. Unless capitalism can be re-configured to truly foster innovation it might be headed towards stagnation and breakdown.
This may seem counter-intuitive since the popular view is that capitalism alone fosters innovation. Indeed there is plenty of venture capital seeking out innovative enterprises – with a new emphasis on social enterprise.
What is not so widely acknowledged is that excessive privatization of knowledge is stifling the quest for critical inventions and discoveries. This is a consequence of the proliferation of what has been called the ‘anti-commons.’
It is therefore imperative to reframe the discourse on patents in the wider context of efforts to reform capitalism itself. But first a brief review of the historical legacy.
In 1758 John Dollond, a British inventor, was granted a patent for designing achromatic lenses, which vastly improved the quality of telescopes. Other opticians in London, who had been manufacturing such lenses for about two decades, objected. They argued that it was wrong to give Dollond a patent for a discovery made much earlier and already in use.
When the case went to court the Lord Chief Justice of England ruled in favor of Dollond on the grounds that he was the first to put that knowledge in the public realm while others had held it as a closely guarded trade secret. Narrating this story in his book Common as Air Lewis Hyde, a scholar on the nature of creativity and property, emphasized a key element of that judgment. The commercial benefit of a patent is not a reward for having invented something new but for sharing that knowledge with the public for the larger benefit of mankind – and further invention.
The result was the industrial revolution – with its proliferation of innovation and discovery. But since then something has gone terribly wrong.
Many vital inventions either do not happen or do not reach the market because too much information and knowledge is now being locked up – often by numerous different patent holders.
In his book ‘The Gridlock Economy’ Michael A Heller wrote about a drug company that has found a treatment for Alzheimer’s disease but cannot make it available to the public unless it is able to buy access to dozens of patents. “Any single patent owner could demand a huge payoff, some blocked the whole deal” wrote Heller, who is a professor of law at Columbia University. So, adds Heller: “the drug sits on the shelf though it might have saved millions of lives and earned billions of dollars.”
This is a consequence of patent regimes that have created a dangerous ‘anti-commons’ — a term coined by Heller in an article he co-authored with Rebecca S. Eisenberg back in 1998. Anti-commons refers to a situation when “too many owners hold rights in previous discoveries that constitute obstacles to future research” wrote Heller and Eisenberg.
So where do we go from here?
For some kind of inventions this problem can be solved by creating a consortium that is able to utilize multiple patents and bring a new device to the market. For instance, in the early 20thcentury, all the various components required to build an airplane were patented by dozens of different companies. As James Surowiecki reported in the New Yorker some years ago, airplane production without legal hassles became possible only when Congress intervened to create a ‘patent pool’ under the control of a new association which gave manufacturers licenses for a fee.
However, such mechanisms cannot address a far more serious problem. Extending the scope and duration of patents has hampered cross-fertilization of knowledge.
“Many scientists today work in relative isolation, left to follow blind alleys and duplicate existing research. Data are fragmented — trapped behind firewalls, locked up by contracts or lost in databases that can’t be accessed or integrated” says the website of Science Commons, a network coordinated by MIT computer science professor Hal Abelson and several intellectual property experts.
According to Dr. Els Torreele of the Open Society Foundation, “the number of ‘new molecular entities’—or totally new drugs—reaching the U.S. market slid from around 45 per year in the late 1990s to only 30 last year”.
Moreover, many new drugs are slightly tweaked versions of existing ones rather than true innovations.
Consequently, efforts are being made to encourage public and private resources to finance research—which would bring more knowledge into the commons. According to Dr. Torreele, who is director of the Access to Essential Medicines Initiative of the Open Society Foundation based in New York, “recent experience with not-for-profit drug development is showing that it can be done more cost-effectively than so far assumed”.
These efforts are bolstered by networks like Science Commons, which aim to make scientific research ‘re-useful’ – by exploring new models of licensing that allow individuals and institutions to open and mark their research for reuse.
Similarly, the Open Knowledge Commons – a network of librarians, universities, students, lawyers, and technologists – is also engaged in addressing these challenges. This network is housed at the Berkman Centre for Internet and Society at Harvard.
The key insight of these networks is that knowledge commons and commerce can happily co-exist. But this may require entirely new business models and a wave of creative destruction that sweeps away companies that are currently working in the command and control mode.
Some business thinkers, like John Elkington – who coined the term triple bottom line, believe that unless capitalism finds breakthroughs it will breakdown. Volans, a consultancy firm cum think-tank headed by Elkington, recently released a report titled Breakthrough: Business Leaders, Market Revolutions. Based on interviews with 120 global business leaders this study builds on the premise that the prevailing economic system is not able to cope with the increasingly complex environmental, financial and social challenges.
In this context, the Volans study favors a breakthrough mindset – with businesses driving disruptive change in both markets and political systems – to simultaneously foster deeper innovation and social equity.
This scenario is neither far-fetched nor dreamy.
Business journalist Marjorie Kelly, author of the book Divine Right of Capital, has been studying why some companies and institutions are coping better than others with the ongoing crisis of the global economy. She finds that those who combine traditional private ownership with a focus on common good tend to stay ahead. Her recent book, Owning Our Future: The Emerging Ownership Revolution, documents experiments with new forms of ownership which are ‘generative’. This means that they seek to serve many generations to come – as opposed to extracting short-term financial wealth at the cost of both the environment and human well-being.
This mindset has given rise to various endeavors – among others the Conscious Capitalism network and Corporation 2020. The annual conference of the Conscious Capitalism network, held in San Francisco on 5th -6th April, show cased entrepreneurs who are successfully combining profits with higher social purpose. Corporation 20/20 is another international, multi-stakeholder initiative that is trying to reconfigure the 21st century corporation by moving social purpose from the periphery to the heart business.
These networks are not, as yet, directly engaged in addressing the stifling of free enquiry and invention by heavy handed patent regimes. But supporting knowledge commons, in some form or the other, is implicit in the ideals and principles that are being espoused by these reformers who seek to change capitalism from within.
This entire continuum of trends deserves closer attention because it demolishes the false assumption that there would be no further innovation and invention without super-profits. The critical contest of our times is not between generic drug makers in India and Western companies who hold patents. It is between business models that depend on locking up knowledge and those who can be profitable by enhancing the knowledge commons.
Rajni Bakshi is the Gandhi Peace Fellow at Gateway House: Indian Council on Global Relations.
An edited version of this article was published by the Economic Times on April 19, 2013, here.
This article was exclusively written for Gateway House: Indian Council on Global Relations. You can read more exclusive content here.
For interview requests with the author, or for permission to republish, please contact email@example.com.
© Copyright 2013 Gateway House: Indian Council on Global Relations. All rights reserved. Any unauthorized copying or reproduction is strictly prohibited.