Chapter 2: The Economic Theory of IPRs (Patents and Trademarks)
2.1 INTRODUCTION Economists explore ways of efﬁciently allocating scarce resources to unlimited wants and ﬁnd that private property rights are a plausible way of dealing with scarcity in an efﬁcient manner. Knowledge, however, is a unique resource given that it is not inherently scarce. Theoretically speaking, the potential use of existing knowledge is unlimited and may be diminished only when such knowledge becomes obsolete. Thus, the use of any invention by one individual does not reduce its accessibility to others but is more likely to increase it. Patents, copyrights, trademarks and other forms of intellectual property rights (IPRs) create a temporary monopoly on varying types of knowledge, allowing their owners to restrict, and even prevent, others from using that knowledge. The result, as Hindley put it, is that ʻthe establishment of private property rights in these cases artificially creates the symptoms of scarcity; they do not derive from itʼ.1 Although treated as a group, IPRs are fundamentally different and refer to different types of knowledge resources. The following chapter will thus focus on patents and trademarks as they are more relevant to the R&D pharmaceutical industry, although more emphasis is placed on the former. The chapter concludes that current economic knowledge does not provide a satisfactory basis for explaining the establishment of IPRs. It should also be noted that the international implications of IPRs, particularly with respect to the ʻnorth–southʼ divide, are considered in Chapter 3. 2.2 THE ECONOMICS OF PATENTS Economics, when exploring the...
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