Lawrence Lessig Testimony on “Open Source Dividend Prizes”

Ed Note: On Tuesday, 10:00 a.m., the US Senate Subcommittee on Primary Health and Aging will hold a hearing on the high costs/prices for HIV/AIDs Drugs and the Prize Fund Alternative.  Witnesses include Harvard Law’s Lawrence Lessig as well as  James Love, Joseph Stiglitz and others.  Below is the prepared testimony of Dr. Lessig.


Mr. Chairman, and Members of the Committee, my name is Lawrence Lessig, and I am a professor of law at Harvard Law School. I also direct the University’s Edmond J. Safra Center for Ethics. I am honored to testify in support of Senator Sanders’ important legislation.

I have been asked to address §9 of Senator Sanders’ bill, concerning “open source dividend prizes.” My work studying innovation and creativity on the Internet, especially as it relates to “open source” and “free software” licensing, provides the background that informs my view of this provision. In light of that work, I am strongly supportive of the effort to experiment in alternatives to create the necessary incentives for scientists and researchers to produce the knowledge that progress in science requires.


Since the beginning of the Republic, there has been a fierce debate about how best to create incentives for scientists and innovators to discover and bring to market advances in science that would address important public needs.

On one side of that debate has been supporters of exclusive rights, secured by the government, in the form of patents and copyrights. The Constitution, for example, expressly gives Congress the power to secure to “Inventors” and “Authors” such exclusive rights. Since the earliest days of the Republic, Congress has by law established mechanisms by which such exclusive rights can be secured.

On the other side of this debate have been skeptics about exclusive rights, at least within some domains of innovation. These skeptics have not doubted the need for incentives. They have instead worried that the costs of the system of incentives secured through government granted monopolies would outweigh the benefits. Such monopolies are, of course, just property rights. But as Nobel Prize winning economist Ronald Coase wrote in 1959,

All property rights interfere with the ability of people to use resources. What has to be insured is that the gain from interference more than offsets the harm it produces.

These costs are many, and too often simply ignored. They include not only the costs of administering any patent or copyright system, but also the costs imposed upon the environment of discovery itself. Many have worried, for example, that one unintended consequence of the Bayh-Dole Act has been to inhibit the sharing of scientific knowledge, as technology transfer offices at universities have instructed researchers that secrecy is necessary to protect the patentability of inventions. We have no certain way to measure the significance of this effect, or its prevalence. But skeptics of an exclusive rights strategy for creative incentives worry that we systematically ignore these important costs, and thereby interfere with crucial discoveries.

It is my own view that the patent system has provided essential and critical support to drug development in particular, and innovation more generally. But it is also my view that Congress should experiment with alternatives to the traditional patent system, and evaluate more carefully the conditions under which those alternatives might create more incentives at less over all cost.

The idea of a “prize fund” as an alternative to an exclusive reliance on patents has a long historical pedigree. From the birth of the Republic, both private and public institutions have experimented with prizes as a less costly way to induce important innovation. In the 18th Century, both in Britain and in the United States, private societies “for the Encouragement of Arts, Manufacturers, and Commerce” were established to offer prizes for named innovations. Sometimes these prizes were given in lieu of patents. Sometimes they complemented patents. But the urge to experiment was driven by the recognition that no single, simple system of incentives would produce the optimal amount of innovation. And that innovation about the system of incentives is just as important as the innovation those incentives create. (more…)