Patent Law

Ekonomiska Samfundet and
Juridiska Föreningen
Bättre immaterialrätt
ger ökad tillväxt
’Can you increase innovation
by regulation?’
21 May 2015
Nari Lee
Professor of Intellectual Property Law
Hanken School of Economics
Structure of this presentation
Innovation and Regulation
2. Patent Law: Nature of the ‘regulation’ : Property, or
Innovation Policy?
3. ‘Can patent law increase innovation’?
4. Some thoughts on Patents and National Innovation Policy
© Hanken
1. Innovation and Regulation
- Innovation?
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- Regulation? – Patent Law
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- Innovation ?
» Multi-faceted concept: could be both static, dynamic
» Object/(Artefacts), Technology
» Process / (Behavior)
» ‘Knowledge’ or ‘Informational goods’: non rival
» Connecting producers / technology to the users /market
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Regulation? Nature of Patent Law/System
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L: Patent Law is a law of
property ?
» Property right ?
» ‘Expression or confirmation of natural right of/to property’
» Remuneration (for past harm) + Injunction (for future harm)
As in
» ECHR? Art 1.Protocol 1
» ‘Every natural or legal person is entitled to the peaceful enjoyment of his
possessions.’ Article 1 of Protocol No. 1 to the European Convention on
Human Rights
» Broad concept including immovables, tangibles as well as
intangibles including patents, trademark application*
» The Charter of Fundamental Rights of the EU: Article 17(2)
» “Intellectual property shall be protected”
 Justification (fair and just) i.e. Locke, Hegel becomes important
 Necessary to guarantee fundamental right to property: Fundamental
adjustment may be difficult.
E: Patent system as a policy tool
for innovation?
» One of the policy tools to affect the innovation
?(utilitarian instrumentalist)
» Production of artefacts (incentivise)
» Influence the course of technological development (patent prospect, patent
race, patent signal)
» Govern the behaviors of innovators and their competitors as well as their
 Alternative to subsidies, tax incentives, prizes and contests,
public production or other tools of ‘National Innovation
 Can be changed fundamentally or even be abolished altogether,
if not efficacious !
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E: Patents create artificial
scarcity ?
» Market failure for informational goods:
» Arrow’s information paradox + non-rival nature of knowledge
» Public goods problem :
» goods or information that is costly to develop but little to copy will be underproduced, as investment cannot be recouped. – Sherer, Foray
 Solution by creating ‘artificial scarcity’: exclusivity through law IP law
» ‘ the point of IP laws is to take a public good that is in nature non-rivalrous
and make it artificially scarce, allowing the owner to control…..IP tries to fit
information into the traditional economic theory of goods.’
- Lemley
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Problem for both L&E
after property/ market :Coordination
Coordination in the market
» Patent law allows efficiency in private ordering
» The right holders may trade the rights to maximize their
wealth/preferences : a Coase theorem & ‘Commons’
Law should minimize the transaction costs
» The right holders may refuse to trade to maximize their wealth and
preferences : a Hobbes theorem?: ‘Anti-commons’
Should law intervene to ‘mediate/order/force’ transaction?
‘Regulatory IP’
Patent law as Regulation?
» Regulatory IP: Patent law is both private and public
ordering device:
» the right can be recalibrated to govern resource uses / specific
» ‘IP is a property regime; it is something around which parties can
freely contract. To libertarians, property regimes are good, so if IP rights
are property regimes, more IP is better. But another way to view IP rights
is to say, “this is a government restriction on what people can do with
their own physical property and their own ideas. To libertarians,
government restrictions on what people can do in a marketplace are bad,
and so libertarians ought to think IP rights are bad. The problem is that
IP is both. It is at once a basis around which we can contract and allow
the spread of new ideas and a government regulatory intervention in the
marketplace that is designed to restrict what people can do with their
own ideas and their own property.”- Lemley
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Patent law (regulation with property
rules ) solves the coordination problem:
» ‘tragedy of the commons’ - Garret Hardin (1968)
» Internalize the externalities through property rules
» “In some settings, however, rampant opportunistic
behavior severely limits what can be done jointly without
major investments in monitoring and sanctioning
― Elinor Ostrom, Governing the Commons (1990)
 Exclusive property rights monitors and sanctions
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Or creates coordination
» ‘a resource is prone to underuse in a “tragedy of the anticommons” when
multiple owners each have a right to exclude others from a scarce resource
and no one has an effective privilege of use. In theory, in a world of costless
transactions, people could always avoid commons or anticommons
tragedies by trading their rights.
» In practice, however, avoiding tragedy requires overcoming transaction
costs, strategic behaviors, and cognitive biases of participants, with success
more likely within close-knit communities than among hostile strangers.
Once an anticommons emerges, collecting rights into usable private
property is often brutal and slow.’ - Heller, Michael A., and Rebecca S.
Eisenberg. (1998)
» Others (Shapiro, Scotchmer, Mazzoleni and Nelson, Nelson and
» rights overlap & fail to coordinate or creates more fragmentation
 OTHER Institution than than right should coordinate
 Regulatory IP? Or …
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Patent failure? Cumulative Innovation
& Technology Iteration
‘If I have seen further
it is by standing on the
shoulders of giants’
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Patent expiration sparks innovation?
Open & Collective Innovation in 3DP
» U.S. Patent No.
4575330 “Apparatus
for Production of
Objects by
» U.S. Patent No.
5,121,329, Fused
Deposition Modelling
» U.S. Patent No.
4929402, U.S. Patent
No. 4999143 and U.S.
Patent No. 5174931
Open and Collective
 Free 3D printer projects
• Free and Open Source Software
• Open Design / Public Domain Design
• RepRap ‘Principle’
 Free revealing and sharing of the printer designs
based on core technologies
 User’s contribution fed back into tech.
development of the 3DPrinter (design
 To preserve freedom of operation (IP assertions
are discouraged)
Hanken Svenska handelshögskolan / Hanken
School of Economics
Regulatory IP & ‘governance’
» Centralized or Decentralized Governance?
» Coordination or Governance?
» National Patent (IP) Policy (Strategy) and Institutional
» Patent & “Innovation” Systems Reform: Governance
» What is a model of an efficient and legitimate patent system
(administration & enforcement)?
Hanken Svenska handelshögskolan / Hanken
School of Economics
Some concluding remarks
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National innovation strategies &
2009 Topics
2009 Tasks
» Globalisation
» Competence
» Digitalisation
and convergence
» Efficiency of
» Politicisation of
property rights
» Competition law
and the
functionality of
the markets
» Expansion in
» Efficiency of
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Finland: Global Innovation Index
WIPO Global Innovation Index 2014
21 Indicators
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Patents from Finland in the world
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Finland : Top 20 patent origins
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Concluding remarks
» Multi-actor/institution coordination model
» More stake holders call for coordinator:
» Who will coordinate the direction of the ‘coordination’ is the
question of ‘governance’
» Regulation should not prevent innovation : strengthening
intellectual capital does not mean strong intellectual property
rights in all innovation: no one size fit solution
» How openly should government ‘nudge’ the market actors
» Caution: Top-down policy may fail! National patent governance
with stronger roles from the administration has a tendency become
a means of governmentality as success of the initiative often
have to be measurable
» Reminder: Finnish Education system + University as a place for