Michael Heller, professor of Real Estate Law at Columbia Law and author, talks about examples of gridlock.
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Let me give you a life example that’s happening right now. Some years ago, I published an article in a science magazine outlining the basic idea, the idea that too many owners can lead to too little prosperity. As part of that discussion around that article, I was contacted by a number of drug company executives and one of them told me, “I’m pretty confident that I have a drug that will substantially advance treatment of Alzheimer’s which could affect millions of lives.” And if the drug came to market, it could earn his company billions of dollars. But he had sold the drug. I’m not bringing this drug to market and I asked him why. What he explained was that to develop the drug, to bring it to market, he was going to need to acquire licenses to dozens and dozens of patents. Now, imagine this guy walking into an auditorium and imagine each of those patents that’s relevant to his drug owned by a separate person, usually by some small biotech company, and they would sit in their little chair with their patent on their lap, and every one of those owners believes that their patent like their child is the most special and important patent in the world. For the drug developer, to bring his drug to market, he needed to successfully negotiate to every single person in that room. Now, it’s hard enough getting a group of friends to decide where to offer dinner to a restaurant, but it’s really impossible when you have dozens or hundreds of separate patent owners. Each one of them believes that their patent is the most important to get every one of them to come together and agree to let this drug go forward. And the drug developer discovered that he simply wasn’t able to do it. The negotiations were too hard. Each of the separate patent owners, the men with such a high price that in some, the demanded more in the potential profits from that drug. So what he did is he shoved that Alzheimer’s cure. He gave up the billions of dollars potentially that was on the table because he simply couldn’t find a way—there’s lots of impediments to drug research. Lots of drugs don’t work or they have side effects. But one of the problems in drug development that hasn’t really been focused on that I’ve discovered and then talked about in this book is a separate problem, not the side effects, but ownership effects. There are too many owners. And what happens there is that—what he did, with this drug developer, he went to a spin off of existing drugs that he already had intellectual property for so he can make money from spin offs but he gave up the real new blockbuster drug that could have saved a lot of lives. Now, that is not an isolated example. In the last 30 years, we’ve seen drug research investment, drug RND money going up and up and up. More and more money is going to the RND. We have a whole new biotech industry based on drug RND. Be the number of new drugs treat disease has gone down and down and down. That’s really shocking. What you have is an increase in spending and a decrease in cures. You have a drug discovery gap and that gap isn’t an accident. That gap is caused by good luck. We have lots more inventions of the pieces, of the input that you need to make drugs which is great but fewer of the drugs that actually saved lives coming out of the other end of he drug RND pipeline. This isn’t just an accident. This doesn’t just automatically work this way. This is the outcome of the set of positive choices that the United States made about less than 30 years ago. We decided that we wanted to get more private money into basic science, and the way that you do that is that you give more property rights if you discover stuff. So we changed the patent law and we changed how we encourage universities to deal with their scientists. Now, scientists are told in universities to patent what you discover, commercialize it. And that’s great. So the upside of those changes and the patent and in how we treat university scientists over the last 30 years is that w