Brian Kahin Patents and Diversity in Innovation University of Michigan September 29, 2006

treat different cases differently…. an intuitively appealing idea but

patent policy is hard

patents  invention  innovation –rights-based process vs utilitarian jurisprudence and policy –policy is process-driven (law) rather than results-driven (economics) –diminishment of “invention” problems of definition, measurement, and analysis –confusion of exclusion and exploitation –ephemeral lines: nonobviousness/inventive step, novelty (context-dependent), UCT/technicity –astronomical transaction costs – “sport of kings” but also context-dependent –most data is private; analysis is ad hoc, largely academic –extreme complexity

institutional competence –autonomous process-focused patent offices –process-focused judiciary – no means of accumulating testable body of expertise –dominance by process-focused professionals politics –multi-level capture –extreme complexity in the face of simple long-established models –small-large/upstream-downstream/principal-agent dynamics  inertia  incrementalism

pressure to get policy right importance of innovation to economic growth –comparative advantage for developed economies –patents critical in some sectors – dangerous in others growing role (scope, scale & strength) of patents –diversity in subject matter 

basic science biotech software services social sciences/ liberal professions complex technologies traditional subject matter expansion of subject matter logic, mathematics

pressure to get policy right importance of innovation to economic growth –comparative advantage for developed economies –patents critical in some sectors – dangerous in others growing role (scope, scale & strength) of patents –diversity in subject matter –diversity in process of innovation (e.g., collaborative innovation vs. pipeline model) diversity in business context (globalization, information revolution, disaggregation) diversity in business strategy and patent practice

“our international obligations” [P]atents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application…. [P]atents shall be available and patent rights enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced.” [TRIPS 27.1]

TRIPS 27.1 Industry Capture: Backdoor Industrial Policy (masquerading as trade policy) Dangers of Diplomatic Negotiations –opaque process, uninformed, susceptible to capture –constitutional principle (not the law anywhere –preempts informed policymaking –preempts legislative engagement Ambiguity, Uncertainty, In Terrorem Effects  Inertia

We just keep replicating the old results based on the old precedents, whether they have kept pace with changes in business, changes in technology, or changes of a different sort…. [W]e just get the Federal Circuit talking to itself, with the brief writer just being the echo of what we wrote in all those prior cases. And then we write some more cases, and the cycle just goes on and on and on. And it certainly lacks the benefit of being tightly wired to the evolving reality. -- Paul Michel, [Chief Judge], CAFC, Berkeley Conference on Patent Reform, 2002

FTC Hearings and Report focus on legal and business effects showed key industry differences documented dysfunction in practice legitimized discontent –now manifest in patent reform integrative: bridging economic and legal perspective at a policy level demonstrate void in institutional competence

levels of “discrimination” (differentiation?) technology-specific: –nuclear weapons, biotech, surgical methods, business methods judicial interpretation/application (Lemley/Burk) –transparency/institutional competence problem “technology-neutral” economic factors stewardship by “field of technology”

stewardship Fields of technology responsibility for optimizing performance subject to standards and oversight –parallel to professional self-regulation –danger to new entrants and future innovators –puts risk of capture out in the open –forces development of regular record, evidence-based policy