Setting the Defaults for Intellectual Property Policy
Rufus Pollock
First draft 2005-04-25, this draft 2006-01-06
Please post comments and corrections to comments [at] thefactz.org.

Who Bears the Burden of Proof?

It is generally agreed that intellectual property policy should be made on the basis of evidence. This is a very sound and sensible idea. However, in practice, this requirement often has little force for several reasons.

First, is not clear, or generally agreed, what should count as evidence -- for example should industry representations count or only peer-reviewed research, based on 'hard data'? Second, and related to the first point, there is a general lack of widely-accepted evidence on which to base policy. Third, it is not clear how policy derives from evidence because it is not clear what the preferences of policy makers are -- for example are policy makers pursuing general social welfare or national income?

The net result is that while a requirement to be 'evidence-based' seems great in theory, in practice it has little impact on the determination of actual policy. This is natural: when the evidence or process for applying it is uncertain decision makers will fall back on their prior beliefs, inclinations and prejudices. Given this, we need to strengthen the requirement to make policy on the basis of evidence by additionally specifying what these priors should be. I therefore propose that the following principle be adopted to clearly specify the defaults:

In the formulation of intellectual property policy the burden of proof should be placed upon those who seek to extend IP, be it in scope, term, or subject matter.

Why?

Why should the burden of proof be placed on those who seek to extend rather than those who seek to reduce or retain the status quo? There are the following reasons:

1. First, IP is a monopoly and therefore has costs. Such monopoly privileges should only be granted where necessary and when clear benefits that outweigh their costs have been shown. In this respect it is the mirror image of property rights in tangibles such as land where the default is the grant of such rights.
2. Second, once a particular IPR has been granted it is very difficult to remove or rescind. Thus changes in IP regimes tend to be one-way. In a system that must seek balance this creates an inherent bias towards too much IP and this should be counteracted by requiring a high threshold of proof of benefit before a new right is introduced or an existing one extended.
3. Third, lobbying on IP will often shows distinct asymmetries. Direct beneficiaries of IP grants, usually current or potential rights-holders, will often be better-organized and more vocal in their representations to law-makers than those who will bear the costs -- i.e. the general public as well as future innovators [1]. These asymmetries are further exacerbated by:
   • Due to several factors associated with innovation and creativity such as high level of risk, large sunk costs etc, the concentration of ownership and/or cartelization among owners of IP may be very high. This increases the imbalance in power.
   • The free-rider aspect of intellectual goods militates towards the use of centralized (international) agreement in the formulation of policy in relation to them, particularly in the creation of intellectual property. This has the effect of biasing policy towards those best able to participate in centralized, international fora. Those able to do this, that is, able to extend power over time and distance, will usually be those who are concentrated rather than diffuse.
4. Asymmetry of information: those seeking extensions are usually those already in possession of similar existing rights. As such they usually possess much of the data relevant to making an informed decision about the costs and benefits of these privileges (for example sales data that allow the demand curve to be inferred). Thus, locating the burden of proof on those seeking extensions induces disclosure of the very data necessary for an informed decision by policymakers.

[1] This should not be taken to indicate that the general public or future innovators may not gain from the award of IP rights through an increase in innovation. However the general public, unlike those who will receive those monopolies, also bear costs. This makes them the only group in a position to be unbiased about the grant of IP monopolies since they experience both the benefits and the costs.

Related Work

In October 2005 the Royal Society of Art's launched a charter on Innovation, Creativity and Intellectual Property (http://www.adelphicharter.org/). The charter is explicitly targeted at policy-makers stating in its preamble that: We call upon governments and the international community to adopt these principles. The relevant item for our purposes is the final one, number nine, which states:

In making decisions about intellectual property law, governments should adhere to these rules:

• There must be an automatic presumption against creating new areas of intellectual property protection,extending existing privileges or extending the duration of rights.
• The burden of proof in such cases must lie on the advocates of change.
• Change must be allowed only if a rigorous analysis clearly demonstrates that it will promote people’s basic rights and economic well-being.
• Throughout,there should be wide public consultation and a comprehensive,objective and transparent assessment of public benefits and detriments.