Toward a new era of intellectual property: aligning competition and IP policy Richard Gold Associate Professor Innovative to abuse? Exploring the interactions between intellectual property and competition law October 29, 2008

Basic argument Good governance of innovation depends on coordination between intellectual property law, competition law and innovation policy The current approach is based on an outdated model of innovation This leaves substantial gaps between IP and competition policy, leading to overly aggressive use of intellectual property in certain fields

Agenda Linear vs. complex innovation systems The increasing importance of collaboration The role of IP law The role of Competition law The role of public policy

The old linear view of innovation

Innovation is circular Innovation is circular and iterative Diffused in space and time Innovation depends on networks of public and private sector actors

Implications A circular innovation system challenges the notion of a single, identifiable market for investigation –A single intellectual asset protected by IP has simultaneous effects in the innovation market, product market and knowledge markets This further complicates assessment of whether market power exists since it may not in the primary market but may in secondary markets IP can block innovation directly even in the absence of clear network effects

Partnerships and innovation The innovation environment has changed significantly over the past 30 years –30 years ago, 80% of innovation was conducted in a single firm –Today, 2/3rds of innovation derives from partnerships, particularly between the public and private sectors –Greater diversity of actors Public sector (universities and government labs) much more important players, in some fields, holding over 50% of patents

Traditional innovation models are breaking down in certain sectors (e.g. biomedicine) –These were based on the aggressive use of IP to keep competitors and users out Increasing recognition that aggressive use of IP prevents partnerships and further innovation Partnerships and innovation

Implications IP and Competition policy should encourage partnerships and discourage aggressive use of IP to block competitors and users Non-exclusive licensing, knowledge sharing, club goods, donations to the public domain, shared investments should be encouraged

Implications Pooling and other partnership mechanisms should continue to be viewed as pro-competitive Reluctance to review per se exercise of exclusive IP rights misplaced –It is exactly here that problems exist –E.g., clinical genetics

Role of IP law There is little evidence to support the conclusion that IP encourages investment in research IP probably has a larger role in bringing an idea to market IP offices are trained in the technical area of an invention and are ill-placed to assess the impact of the invention or of the IP right on innovation and access

Role of Competition Law To ensure that the market operates fairly and transparently As the exercise of IP rights affects the flow and use of knowledge, competition law should ensure that market actors do not impose any unnecessary blockages Competition offices have expertise in the effects of market action on the movement of assets, including intellectual assets and knowledge

Role of Public Policy To ensure that the exercise of public rights in IP are used to increase knowledge flows and access To encourage private actors to do the same To create the policy instruments through which specialised agencies can fulfill their mandates

Conclusion The worlds of IP and competition policy continue to artificially divided IP should be more careful about awarding rights but cannot be expected to assess use of IP rights Competition should be more careful about monitoring the use of these rights Policy makers have given both the patent offices and the competition offices the instruments needed to ensure the flow of knowledge –E.g., section 32 of the Competition Act Offices need to exercise these powers