When you get in a conversation about pharmaceuticals, everyone always asks me: "Why can't they just give them away? Drug companies make so much money anyway. Why do we even have patents?"
Well, the reason is that piracy stifles innovation. If people can't make any money off what they make, then they can't afford to design anything new. Don't believe me...read this:
Kingsoft Corp.'s English-Chinese dictionary program is used on most of China's 60 million PCs. That's the good news. The bad news: Kingsoft doesn't make any money from it, because 90 percent of those copies are pirated.One by one, the Beijing-based software maker has seen its sales of such popular products destroyed after black market producers flooded the market with cheap copies.
Today, Kingsoft's 600 programmers focus on making what it hopes can't be copied -- online games and business and anti-virus programs that have to be linked to its own computers in order to function.
"Piracy has had a big impact on us, making it so we can't get powerful and compete with Microsoft," said Ren Jian, a former Microsoft manager who is Kingsoft's chief operating officer.
Kingsoft is far from alone. Rampant Chinese piracy of music, movies and software that raises howls of protest from the United States, Europe and elsewhere is hitting China's fledgling creative industries hardest of all. Robbed of sales in their key home market, companies are short of money to develop new products to compete with foreign rivals.
Losses to piracy are especially damaging at a time when communist leaders want China to transform itself from the world's low-cost factory into an "innovation society" that makes its own profitable technology and brand names.
The cost of particular drugs, like the cost of particular softwares, eventually comes down. The Chinese lack of copyright enforcement, however, has completely destroyed any endogenous software market, preventing any new products from being made in the first place. Governments place fast and loose with this at their peril.
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While limited government granted monopolies like copyrights are useful for creating markets for "goods" that have an effectively infinite supply and thus effectively zero price like software or books in a digital age, it's essential to balance the protection regime. While China's protections are too weak (in enforcement if not in law), America's protections are too high to maximize innovation. Unlike drugs, software works in a manmade substrate, making compatibility an essential issue, yet the DMCA allows corporations to make it illegal to produce compatible software like DVD players for Linux. See Jessica Litman's Digital Copyright and Lawrence Lessig's The Future of Ideas for details.
Finally, it's important to point out that this entry confuses patents with copyrights, which are two very different monopoly protection regimes. You can get a patent on drugs in almost any country, but only the US and a couple of other countries have software patents and the vast majority of software producers there find them a pointless but expensive obstacle instead of an encouragement to development, finding copyright a more useful type of monopoly protection.
I agree that there are key differences between patents and copyrights, and I would like to avoid going on a long tagent of the rather limited wisdom in the DMCA. My point was that monopolies are good for innovation. I could see how the paperwork involved in getting a patent might be chore when you have something that changes as easily changed as software, but drugs take years to develop.
Rather than getting into the choice between copyrights and patents I was trying to point out the common benefits.