Greenspan on IP

We mentioned the patent dilemma facing software companies a couple weeks back, pointing to articles in The Industry Standard and Forbes. Since then, Greenspan has weighed in with a speech at the 2003 Financial Markets Conference entitled Market Economies and Rule of Law .

Of particular note, Greenspan addresses the "increasing conceptualization of U.S. GDP." In other words, more and more of our products are ideas, not material goods. Where you would have bought a typewriter and an adding machine for your business 50 years ago, today, you buy software to accomplish the same tasks and more.

Of course, the adding machine probably still works 50 years later without yearly upgrades, but that's another story.

Greenspan goes on to point out that, though the development costs on conceptual products are high, the reproduction and distribution costs are negligible. This allows the software companies to maintain high margins on products where their hardware counterparts suffer decreasing margins. If nothing else, this serves to show that the effects of intellectual property (IP) laws are radically different (and often opposite) when comparing material and conceptual goods.

Greenspan's purpose seems to be to call attention to the issue, not necessarily weigh in on one side or the other. He seems to be calling for more studies on the effect of the length of patents on economic growth. The suggestion is that property law developed by an agricultural society may not be suitable for an increasing conceptualized marketplace. It has certainly has had different effects.

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