Fisher, William Intellectual Property and Innovation: Theoretical, Empirical, and Historical Perspectives 2002
Industrial Property, Innovation and the Knowledge-based Economy (Ashgate, 2002)

In this paper, Fisher outlines five main strategies that can be employed by governments to promote innovation (and prevent the slow in innovation that might otherwise occur as a result of free-riding):

  • government can engage in technological innovation themselves
  • government can subsidise innovative activities by private actors (e.g. by grants)
  • governments can issue post-hoc prizes or rewards to persons and organisations that provide the public socially beneficial innovations
  • in some contexts, governments can help innovators to conceal from the public information essential to implement their innovations, thus increasingly their ability to charge persons who wish to take advantage of those breakthroughs (e.g. through trade secret laws)
  • governments may confer intellectual property rights upon innovators.

Generally, governments engage in a mix of these five strategies (though (3) is rare). Number (5) is, however, the most popular. Fisher notes that reliance on IPRs can have some unfortunate side effects, such as that they are costly to administer and that they sometimes impede cumulative innovations. He states that in deciding whether and how to employ this fifth strategy, the potential availability of the other four approaches should always be considered.

Fisher then asks, “What specific innovation-enhancing policies have succeeded – and failed – in specific technological contexts?” He goes through four different fields of technology: pharmaceuticals; biotechnology; aviation; and computer software.

Conclusion:

“Here, then, are a few tentative generalizations suggested by the histories of the pharmaceutical, biotechnology, aviation, and software industries: (1) Intellectual property rights are most likely to foster innovation when the following conditions converge in a particular industry: (a) high research-and- development costs; (b) a high degree of uncertainty concerning whether specific lines of research will prove fruitful; (C) the content of technological advances can be ascertained easily by competitors through “reverse engineering”; and (d) technological advances can be mimicked by competitors rapidly and inexpensively.

(2) The likelihood that intellectual-property rights will impede more than stimulate innovation increases as more and more of the following factors obtain in a particular field: (a) trade-secret protection or lead-time advantages reduce the ability of competitors to take advantage of technological advances; (b) innovation in the field tends to be highly cumulative; (C) researchers in the field are motivated primarily by nonmonetary incentives; (d) the field is characterized by strong network externalities. The last three of these circumstances were all present during the development of the technical infrastructure of the Internet; it is thus not surprising that that development proceeded rapidly and effectively with little reliance upon intellectual-property systems.” (pages 28-29)

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