Eminent Domain and Intellectual Property

Can eminent domain be used in the case of intellectual property? It may sounds farfetched, but the Washington DC City Council is exploring the idea as a way of cutting health care costs. Councilmember David Catania, who has been leading the charge in the city to encourage re-importation of drugs from Canada, is proposing legislation (Bill 16-114)to use eminent domain to seize the formula and contract with a cheaper generic manufacturer. (See story in Washington Post, District section.)

It is an interesting concept - but there any many twists to the tale. First are the limitations on the use of eminent domain. The Supreme Court is currently looking at that in case of Kelo v. City of New London.

More fundamental is the notion of ideas as property. The proponents of stronger intellectual property rights constantly portray this as a property right. "It is mine, I own it, you can't take it away." They make the moral and legal arguments based on the age old concepts of the sanctity of private property.

However, others have argued that the concept of intellectual property is fundamentally flawed. It is not "property" but a government-granted right of monopoly - similar to the old AT&T monopoly over the phone business or an airport landing right. Larry Lessig puts it succinctly in his book, the Future of Ideas (p. 205):

A patent is a form of governmental regulation. It is a state-backed monopoly granting exclusive rights to an “inventor” for an invention deemed useful, novel, and nonobvious.

This view of intellectual property is not just some left-wing idea. As Judge Richard Posner and William Landes have argued (from the right):

Equating intellectual property rights to physical property rights overlooks the much greater governmental involvement in the former domain than in the latter, at least in a mature society in which almost all physical property is privately owned, so that almost all transactions involving such property are private. Government is continuously involved in the creation of intellectual property rights through the issuance of patents, copyrights, and trademarks. Skeptics of government should hesitate to extend a presumption of efficiency to a process by which government grants rights to exclude competition with the holders of the rights. Friedrich Hayek, than whom no stronger defender of property rights can easily be imagined, warned that "a slavish application [to intellectual property] of the concept of property as it has been developed for material things has done a great deal to foster the growth of monopoly and . . . here drastic reforms may be required if competition is to be made to work. In the field of industrial patents in particular we shall have seriously to examine whether the award of a monopoly privilege is really the most appropriate and effective form of reward for the kind of risk-bearing which investment in scientific research involves."

There are also international ramifications of this proposed legislation. If governments in the US can seize intellectual property, every developing nation in the world who has tried the same thing will feel vindicated (and emboldened to do so). While compulsory licensing requirement such as this have been ruled illegal in international trade, exceptions have been carved out for AIDS and other drugs (see Comsumer Project on Technology).

The hearings on the bill may put the drug companies (and others) in an awkward position. If they maintain their conceptual framework that patents are property, then they have to explain why the application of eminent domain does not apply. If they argue that IPR is not property, but a government-granted right, then they have to argue why the government can't limit or take away that right in cases of public health emergencies (this is essentially the argument that was generally successfully used in the case of AIDS drugs in South Africa). My guess is that they will argue both contradictory positions simultaneously. It will be interesting to watch.