In Defense of Weak Intellectual Property Laws

For businesses operating in multi-national markets, attractive markets feature strong property laws. Strong intellectual property laws protect inventors, innovators and entrepreneurs. Entrepreneurs and innovators deserve the exclusive right to profit from their novel ideas. These statements seem consistent with the generally accepted theory and operation of business. But are they too narrowly focused?

Pfizer’s Protected Information

A recent news report about Enbrel, a biologic drug manufactured by Pfizer, demonstrates one way in which current U.S. intellectual property law impacts society beyond the business environment. Enbrel was approved by the United States Federal Drug Administration for the treatment of rheumatoid arthritis in 1995. In 2015, near the end of Enbrel’s patent protection period, researchers employed by Pfizer discovered evidence that Enbrel also significantly reduces the risk of Alzheimer’s disease.

However, Pfizer declined to conduct clinical research to confirm the researchers’ discovery and chose not to publish the data supporting the drug’s potential to reduce the risk of Alzheimer’s. Pfizer denies that its decisions were based on the likelihood that manufacturers of Enbrel’s generic equivalents would profit from Pfizer’s research. It is true, though, if Pfizer had conducted clinical trials and established Enbrel reduces the risk of Alzheimer’s, that the manufacturers of generic equivalents would have benefited—as would have many suffering from Alzheimer’s. Without the promise of patent protection, pharmaceutical companies like Pfizer lack incentive to explore, exploit, and share information regarding all beneficial uses for their products.

Brazilian Bikini Battle

On the other end of the spectrum, “The Itsy-Bitsy, Teenie-Weenie, Very Litigious Bikini” published in December 2018 in the New York Times, explores how intellectual property can be pirated under the law. In 2012, after receiving a compliment from a friend on her colorful crochet-and-elastic bikini, Ipek Irgit used her swimsuit as a prototype to reverse-engineer the bikini, which she then began producing and selling under the brand “Kiini.” Ms. Irgit’s “Kiini” features elastic straps threaded through crocheted triangular panels and contrast-color stitching. As the “Kiini” gained worldwide popularity, it inspired the production of similarly constructed competitors. Ms. Irgit applied for a copyright from the United States Copyright Office to protect her branded product and subsequently filed multiple lawsuits for copyright infringement and violation of Kiini’s unique “trade dress” features of colorful crochet and elastic bands. First, she sued Victoria’s Secret, and the case settled before trial.

Then, Ms. Irgit sued Neiman Marcus, in a case that remains pending. In the Neiman Marcus litigation, a Neiman Marcus swimsuit supplier, PilyQ, learned of a Brazilian entrepreneur, Maria Solange Ferrarini, known in her beach town of Trancoso as “the bikini lady.” Ms. Ferrarini has been making and selling crochet-and-elastic bikinis on the beach in Trancoso since 1998. Ms. Ferrarini shared a detailed story explaining the necessity that led to the invention of her product. Ms. Irgit admitted to having traveled to Trancoso, Brazil earlier the same year she began producing her “Kiini”. One can reasonably conclude which entrepreneur truly invented the product and which one exploited the copyright protection provided by U.S. intellectual property law.

Purpose of Protecting Property Rights

A comparison of the business decisions of Pfizer and Kiini reveals that the framework of intellectual property laws stifled trade, not only to the detriment of the companies’ competitors, but also to our collective society. Pfizer’s decision prevented potential benefits not only for its competitors, but also for people suffering from the debilitating medical diagnosis of Alzheimer’s. Kiini’s litigiousness not only imposed costs on Victoria’s Secret and Neiman Marcus, but also damaged the collective trust in the existing intellectual property protection scheme.

In general, the intended goal of property law is to foster the stewardship of resources to incentivize production and commerce, and the means to achieve that goal is to provide certainty of ownership. In contrast, in the absence of laws ensuring certain ownership, possessors of resources would be distrustful of trade, choosing instead to hoard resources, thwarting trade and commerce. Specifically, ownership of intellectual property, in particular, is determined by national laws, which are enforceable only by individual national governments. As global trade increases, the usefulness of intellectual property laws becomes increasingly questionable.

Intellectual Property and International Trade

Although the world economy thrives on global trade, not all businesses or entrepreneurs have the resources to protect their intellectual property in multiple national markets, and such protection might well stifle trade. Swimsuits produced and sold Ms. Irgit, under the “Kiini” brand do not infringe upon the property rights of Ms. Ferrarini, “the bikini lady,” in Trancoso, Brazil. Both sellers benefit to the full extent of their resources. Indeed, Victoria’s Secret and Neiman Marcus could have, too.

Businesses with sufficient resources to take full advantage of intellectual property protections, like Pfizer, may be motivated by objectives other than the primary intent to preserve their property rights. While there exist legitimate needs to protect novel systems and unique ideas, the expiration of patent protection anticipates the benefit of ultimately sharing information that leads to the more productive use of resources. Indeed, if ideas and products were truly inimitable, intellectual property laws would not be needed at all.

Meagan Lynn Miller