The Health Law Ethics
& Policy Workshop Series
&
The Centre for
Innovation Law and Policy
present
Benjamin
Roin
Hieken Assistant
Professor of Patent Law, Harvard Law School
Intellectual Property, Prizes,
and Marginal-Cost Pricing
Thursday, March 31, 2011
12:30 – 2:00
Faculty of Law,
University of Toronto
78 Queen’s Park, Flavelle
House
Classroom B
Toronto, Ontario, M5S 2C5
Everyone is welcome to attend, no
registration is required.
ABSTRACT
Over the past decade there has been an explosion of scholarship on the
use of prizes as an alternative
to intellectual property from promoting private investments in R&D. Under a prize system, the
government rewards innovators with a prize instead of an intellectual property right, such
that innovations fall immediately into the public domain. It is generally assumed that
eliminating intellectual property rights would result in prices closer to marginal cost,
thereby reducing deadweight loss. The standard objection to prize proposals is that
the government might offer the wrong reward for innovation. In his article: “Intellectual
Property versus Prizes: A Policy-Lever
Analysis”, Prof. Roin examines this literature
and reaches several conclusions about the choice between intellectual property and prizes. First, the proponents
of the prize system have made a respectable
case that the government could acquire sufficient information about innovations to calculate an
appropriate prize. Several scholars have taken this argument too far, however,
concluding that prizes are superior to intellectual property in part because they offer better
incentives for innovation. This argument is mistaken because any mechanism to calculate
rewards under a prize system could also be used
to supplement or tax
profits under intellectual property, resulting in the same outcome.
The prize system therefore cannot be justified as a way to improve the
incentives for innovation provided by
intellectual property. Second, government mismanagement of prize payouts may distort the
incentives for R&D under a prize system. Assuming that prizes are paid out of general tax
revenue, there is a significant danger that the government will try to underpay
innovators; and the allocation of prize money will likely be affected by rent-seeking and
excessive bureaucratic control. Third, although prize advocates generally agree that the
core justification for replacing intellectual property with prizes is to set consumer
prices more efficiently, the existing scholarship glosses over the likely impact of prizes on
consumer prices. A prize system would almost certainly move prices closer to marginal cost,
but in some circumstances that movement would be only modest. Moreover, there may be
other ways of setting consumer prices near marginal cost without eliminating intellectual property, such as
government price controls.
BIOGRAPHY
Professor Roin is a
Hieken Assistant Professor of Patent Law. He graduated from Amherst College in 2000; and from Harvard Law School in
2005. He clerked for judge Michael McConnell on the 10th
Circuit Court of Appeals in the United States from 2005-2006. Between
2006 and 2008, Prof. Roin was an academic fellow at the
Petrie-Flom Center for Health Law Policy, Biotechnology and Bioethics at
Harvard Law School. He began teaching at
Harvard Law School in 2008.
For other upcoming Seminars please visit the Seminar webpage or contact m.casco@utoronto.ca
The
Health Law Ethics and Policy Workshop series brings local,
national, international scholars and policy makers as guest speakers to the
Faculty of Law, University of Toronto to stimulate discussion of
issues related to the intersection of law with health care and related ethical
and social issues. The series is organized by the Faculty’s Health Law
group and is sponsored by the CIHR Training Program in Health Law, Ethics
and Policy. The training program addresses the global shortage of
experts in the multidisciplinary field of health law, ethics and policy by
providing key learning opportunities and competitive scholarships to
outstanding Canadian and international graduate students. For more
information about the seminar series and/or the training program, please visit
our website at: www.healthlawtraining.ca or contact: m.casco@utoronto.ca.
