Sunday, April 06, 2014

Lingering Thoughts About the "Innovation Law Beyond IP" Conference

Guest Blogger

Michael Abramowicz

For the conference on Innovation Law Beyond IP at Yale Law School

In my comments at this past weekend's "Innovation Law Beyond IP" conference, I had the pleasure of reviewing two careful and creative articles, Daniel Hemel and Lisa Ouellette's Beyond the Patent-Prizes Debate and John Golden and Hannah Wiseman's detailed exploration of the development of fracking technology (summarized here).

Taken together, these papers highlight that there are many ways of promoting innovation. Hemel and Ouellette highlight several: patents, prizes, grants, R&D tax credits, and patent boxes (tax breaks on patent income). This is not a long list, but it is considerably broader than the typical exploration of innovation policy. They also do an excellent job of pointing out variations in each of these. I was particularly pleased that they carefully distinguished winner-take-all prizes from prizes in proportion to contribution, which might more usefully be called rewards. 

Golden and Wiseman explore an even larger menu, suggesting that many different developments contributed to the emergence of fracking: trade secrets, price deregulation, regulatory relief, public-private partnerships, infrastructure development, open-access requirements, private research consortia, access to government property, market access, network regulation, and availability of complementary assets.

And one might develop a still longer list: market structure regulation (such as antitrust), standardization, trademark, commercialization, big science, primary and secondary education, public university research, pro-innovation public relations, non-cash prizes and kudos, and auctions of exclusive rights. No doubt, this list is a partial one. 

From these lists, one might draw the common message of the two papers that many different tools combine to produce innovation, that we should continue to work on each tool separately, and that we should not rely too much on any one system. This might seem to be an optimistic message. Innovation continues to proceed for many reasons.

But I found the underlying message somewhat pessimistic and negative: Government will provide only modest support for innovation, and we can make only modest improvements to existing institutions, so let's accept the small pushes to innovation wherever we can rather than engage in big-think institutional design projects. This seems considerably less optimistic than the tone of the earlier prizes literature.

My view is that we should not give up on the dream of devising a principal innovation-supporting institution that works across industrial contexts and drives innovation substantially above current levels of improvement. Global R&D level are quite low -- less than 3% in the United States, and considerably lower in much of the rest of the world. Basic research spending is less than 0.5% almost everywhere, according to the OECD. And yet, we have good reason to think that technology drives economic growth. China's economic miracle may have many causes, but certainly technology has played a large role in China's ability to grow at speeds much faster than those countries already on the technological frontier.

I have not proved systematically that R&D investment is suboptimal. But there are theoretical reasons to think that it would be. Patents, with limited terms, have limited appropriability. There are international spillovers, limiting the benefit that any government will obtain from its own grants. And of course, there are intergenerational spillovers as well. 

I worry that the intellectual property community has come to accept these limitations and to focus solely on marginal improvements on our existing institutions. Perhaps that is the best that is possible, but I believe that if there were more of a focus on a goal to increase R&D dramatically, we might have mechanisms other than those that Hemel and Ouellette discuss, and the next technological innovation will occur far faster than the development of fracking.

Michael Abramowicz is a professor of law at George Washington University. He can be reached at abramowicz at 

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