Understanding IP through utility and incentive-based approach

In the previous piece, the author discussed how personality matters in intellectual property. The author relates to the personality theory giving Hegelian’s justification for intellectual property. The claim over the property by the creator is because others should identify the work with the creator. If we see any type of literary work, stories, novels, etc. we find that these works signify the authors’ personality which can be expressed as the persona. The individual image and what the society perceives is what is ones’ persona. This Intellectual property and personality connection focus on the creator’s will through the medium of the creation. Now, this piece will specifically be dealing with the utilitarian based approach of intellectual property. Whether utility will work only when there is an incentive-based approach, is something that the paper will throw light upon.

What is the basic understanding of Utilitarianism? Utilitarianism is based upon the simple understanding that any action is morally right action when it produces the most good. It can be said that this theory is primarily dependent upon the consequences of an action. Your action’s consequences will determine whether your actions are justified or not, hence a form of consequential determination. Jeremy Bentham looks at the good with pleasure and pain. The good has to provide with the greatest pleasure and with the least pain. His famous contention was that humans were ruled by two sovereign masters- pleasure and pain. We seek pleasure and avoidance of pain. Well, the foundation being relied upon “moral values” can invite various criticisms. If a poor person is needy and hungry, he stole money and food. So if we rely upon the moral justification, that poor man has not done anything wrong. Because the consequence of his action is morally justified, being that his need and hunger are addressed. Similarly, any grant of intellectual property which is frivolous might be morally justified. Hence this moral justification can be subjected to various criticisms. So our understanding regarding the moral justification will be subjected to a system or institution and not on the individual actions to save ourselves from such criticism.

The utilitarian is based on two classifications, act utilitarian and rule utilitarian. Act utilitarian holds that the individual act is morally right when that act produces the maximum utility. While, on the other side, the rule utilitarian holds that whether an act is right or wrong depends on considering its moral value. If an act ‘A’ produces maximum utility, it will be correct even if ‘A’ is morally wrong, according to act utilitarian. But for rule utilitarian, even if ‘A’ produces maximum utility it will not be correct until it is proved that ‘A’ is morally correct. Hence specific action is morally justified if it confirms moral rules. And moral rules are justified if it creates more utility. Our system of intellectual property falls within the parameter of rule utilitarianism. Therefore, any action will be justified if it conforms to the rules of intellectual property. And the rules of intellectual property will be justified since these rules create more utility.

Now let us understand the above-mentioned premise more thoroughly. In a society, we tend to create a product that gives us the maximum utility. That product should be useful to us more than that of any other product. A simple vacuum cleaner of one company will provide more utility if it is more efficient in working than its counterpart of other companies. Hence we tend to buy that vacuum cleaner. This is where we gave more importance to the consequence of the act. Now, for a rule utilitarian, a vacuum cleaner will be justified under the intellectual property, and the system of intellectual property will be justified as it provides more utility. Hence the vacuum cleaner will be justified for providing more utility.

After understanding the first part of the utility-based model, let us work to link the utility-based model with that of the incentive-based approach. An idea or knowledge is free. We can say that both are Non-excludable and Non-rival. By non-excludable it means that no one can exclude others from the possession of information. Even an IP holder cannot prevent others from the possession of his IP’s information. By non-rival, it means that one person’s consumption will not undermine another person’s consumption. Consumption of information by me will not undermine the consumption of the same information by others. Now if we assume that the idea and knowledge are non-excludable and non-rival, we can conclude that the idea and knowledge transmission is negligible as nobody can be prevented. This follows that there will be no incentive to the person who has executed an idea, as it is free. The inventor will not be able to recover his investment as it is being free-flowing. This brings us to a situation where there will be a complete free-riding. Will anyone take the pressure of inventing something when he knows that it will ultimately be a free-ride for all? The answer to this is no. Now here comes the importance of an incentive-based model. When any person is being given an incentive for his work and he knows that his work will not have a free-riding, it will ultimately result in having better inventions. The better the invention is, the better are the incentive. This will instill a system where we will have goods of more utility, i.e. the best of all the goods.

This again reiterates the similar above proposition. Society seeks to maximize overall utility by ensuring that new products and intellectual work are created. Limited intellectual rights are granted as incentives for the production of such goods. These policies in itself are granted because this acts as incentives to authors and inventors. Hence conclusively, society ought to adopt a system or institution if and only if, it leads to or is expected to lead to maximization of overall social utility. This is where the above proposition of rule utilitarianism that the intellectual property system is morally justified holds as this system helps in maximizing the utility. The system of maximum utility will be possible only when there is an incentive-based approach. And this is where we can draw a substantial link with that of utility and incentive-based approach. By adopting a system of copyright, patents, etc. we can lead to an optimal amount of intellectual work being produced and a corresponding amount of social utility in society.

Some people argue that the system of monopoly should not be supported as it stops others from doing the invention. Adam Moore in his article “Intellectual Property, Innovation, and social progress: the case against incentive-based arguments” explains this very beautifully. For seeking something alternative to patents rights to inventors as incentives, can support by the government be sufficient? He argues negatively. This type of government incentive or funding can stimulate the production of intellectual property without giving monopoly control to the inventor or an author. But will that be enough? James Watt, the holder of the steam engine, denied the license to improve it to Jonathan Hornblower and Richard Trevithick. They have to wait for Watt’s patent to expire before they could develop their high-pressure engine. Adam’s main contention was that this type of government’s incentives will not be enough as one cannot predict the demand in the future market, research development, and resource allocation. This incentive might undermine the inventor as there is a possibility that the inventor will be under-incentivized.

What about granting equal patents to all who discovered similar nature of the product? Adam gave a beautiful example that if X and Y, both are granted the same patents, it will not be beneficial for both. Suppose tomorrow if Y thinks of putting up his invention in the public domain, what will be the use of X’s invention, and what about his incentive. Hence this system will not work like this. How unique will the X’s invention be, when it has already been put into the public domain by Y?

Through this comprehensive article, one can able to understand how important is utility coupled with an incentive-based approach. We cannot imagine a society getting maximum utility without providing an effective consideration. This is where the system of intellectual property plays a massive role in providing maximum utility. After Locke justifies property and Hegel’s personality justification, the utility-based incentive approach forms the bedrock of the jurisprudential foundation of Intellectual property.

Author is an advocate practicing in Allahabad High Court.

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