Stronger IP protection threatens the transition to a circular economy

It is old news that we live in an age of over-production and over-consumption. Yet, consumers across the globe have started to finally grasp the magnitude of the environmental consequences of the current system and are increasingly requesting environmentally friendly products. As a result, many industries are under pressure to change their traditional business model– in which new products are pushed out multiple times per year, and items are discarded as soon as they break or fall out of style– and develop new practices to reduce their environmental footprint.

Specifically, these practices should focus on eliminating waste and reusing resources, which includes repairing old products, reselling used or upcycled products, and recycling products at the end of their lives to create new raw materials or reuse their parts.1 In the past several years, many companies have started voluntarily engaging in some or all of these practices, often with the assistance of new technologies and online marketplaces. Yet, tensions with the Intellectual Property (IP) system arise when third parties try to carry out these practices without IP owners’ consent. The reason for these tensions is that the IP system still focuses primarily on granting IP owners full control over their products. Under this system, the main concern is maximizing social welfare by promoting investment in innovation and market competition. Yet, this system was designed for a linear economy where products are manufactured, sold, and ultimately discarded without considering production’s indirect costs, including environmental impact. Today, on the other hand, we can no longer ignore the environmental costs of production. Thus, promoting sustainability and economic practices that facilitate a circular economy has become a priority. In this context, the primary concern is reusing and recycling existing resources to reduce industrial externalities and environmental damage, not only producing new and innovative products.2

Of course, the relationship between IP and a circular economy is not inherently adversarial. IP rights can help incentivize environmentally friendly practices by promoting sustainable innovations and products. Nevertheless, the current system continues to be based on rules that foster sustainability and circularity, mostly when IP owners remain in full control. On the contrary, should unauthorized third parties try to repair, upcycle, or recycle IP-protected products, IP owners can generally block these activities by claiming IP infringement. While this control may be desirable for IP owners, it does not effectively support circular activities, as it decreases the number of companies engaging in a circular economy. Moreover, IP owners are not legally obligated to implement sustainable and circular practices, at least from an IP standpoint.