Assuming positive consequences with IP reform is a dangerous thought experiment – the only thing we know for certain is that disruption to the current marketplace scares innovators and investors away from the IP field.

Institutional change is difficult – even when the change is known to be beneficial. Changing the institutions that govern the functioning of society is likely to generate short-term disruption, increase transaction costs, and cause errors and inefficiencies. Moreover, there might be losers – people who do not benefit from the change, either at all or in the short run. These losers could reduce their contributions to society because of their grievances against the winners and their feeling of relative deprivation to thus limit or erase the benefits of the institutional change (Dannenberg and Gallier, 2019). Reforms of intellectual property (IP) rights, particularly patents, are a case in point. Despite a broad debate, the net effect of intellectual property on innovation and welfare is unclear. It is thus even more unclear whether a reform would be beneficial. Already back in 1955, the U.S. Senate Judiciary Committee commissioned several reports from experts such as Vannevar Bush and Fritz Machlup on the effects of the patent system and the need to reform it. After surveying 200 years of economic theory on the patent system, Machlup (1958) concluded the following: No economist, on the basis of present knowledge, could possibly state with certainty that the patent system, as it now operates, confers a net benefit or a net loss upon society. [... ] If one does not know whether a system ‘as a whole’ [... ] is good or bad, the safest “policy conclusion” is to “muddle through” – either with it, if one has long lived with it, or without it, if one has lived without it. If we did not have a patent system, it would be irresponsible, on the basis of our present knowledge of its economic consequences, to recommend instituting one. But since we have had a patent system for a long time, it would be irresponsible, on the basis of our present knowledge, to recommend abolishing it. According to Machlup, in the 1950s, we did not know enough about the advantages and disadvantages of the patent system to take risks involved in its demise. Despite decades of research, Machlup’s conclusion still stands – we do not know enough about the effects of the patent system to be able to suggest a clear reform path. In the meantime, the stakes involved in taking action have steadily increased. In Machlup’s time, less than 150,000 patents were filed worldwide in a given year. This number increased 20-fold to over 3 million in 2018. Given the current size and impact of the IP system, are IP abolitionists such as Boldrin and Levine (2008a) or IP reformists such as Bessen and Meurer (2008) and Stiglitz (2008) playing with fire by suggesting that we should abolish or strongly reform IP? IP is now long established and has attained global reach. The disruption risk is therefore greater. Economic agents accustomed to the IP system could be destabilized, demotivated and, in the worst case, not compensated by the path opened by IP reforms.