The Law in Failure: Intellectual Property Law (IP)

Article I, Section 8, Clause 8, the Patent and Copyright Clause:

"The Congress shall have Power To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries."

Does this clause promote or stifle innovation? The Chinese will soon buy us out, thanks to the strangulation of innovation by the legal system. 

If I invent a cute character, Mickey Mouse, and 20 people come out with copies, I will sue them, now. I will enrich the lawyer profession. If I could not sue them, I would be forced to come up with many more cute characters, as each is copied, greatly benefiting the movie public. Imagine where we would all be, providers and consumers of innovations, if we got rid of the lawyer profession. 

Intellectual property law will stifle innovation when poorly designed or overextended. The downside mechanisms are well-documented in economics, law, and history.

1. Blocking cumulative innovation

Many fields (software, biotech, electronics) depend on incremental improvements.

If an initial patent is too broad, it can block follow-on innovators from building on the idea without paying expensive licensing fees or risking litigation.

Example: Sewing machine patent thickets in the mid-1800s — multiple overlapping patents led to lawsuits that froze the industry until a “patent pool” was formed.

2. Patent thickets and “anti-commons”

In complex technologies like smartphones, hundreds or thousands of overlapping patents exist.

Developers must negotiate with many rights holders — a costly and slow process known as a patent thicket.

Too many overlapping rights can lead to a “tragedy of the anti-commons,” where valuable projects are abandoned because clearing rights is impractical.

3. Evergreening and strategic extensions

In pharmaceuticals, companies often make minor, non-therapeutic changes (new coating, dosage form, isomer) to extend monopoly periods beyond the original term (“evergreening”).

This diverts resources away from breakthrough R&D and toward legal gamesmanship.

4. Deterring small entrants

Startups may avoid certain research areas entirely due to fear of costly patent litigation.

Patent litigation in the U.S. can cost $1–4 million per side even before trial, making it prohibitive for small innovators.

5. Slowing diffusion of knowledge

In principle, patents require public disclosure — but many filings are deliberately vague or obfuscated, making replication difficult.

Trade secrets combined with patents can keep crucial know-how locked away even after a patent expires.

6. Misaligned incentives

When monopoly profits depend on preserving scarcity rather than creating better products, firms may:

Avoid disruptive innovations that could cannibalize existing revenue streams.

Focus on patenting defensively rather than innovating offensively.

7. International development barriers

Strong IP regimes, especially when imposed globally via treaties like TRIPS, can limit technology transfer to poorer nations — slowing adoption of innovations like medicines, green tech, and agricultural improvements.

Historical examples of innovation suppression

Wright brothers’ airplane patents (1900s): Aggressive enforcement in the U.S. slowed aircraft development until WWI, when the government forced a patent pool.

Software patents in the 1990s–2000s: Flood of low-quality, overly broad patents led to “patent troll” lawsuits that drained resources from genuine development.

CRISPR gene editing dispute: Multi-year patent litigation between universities delayed broad-scale commercial use.