What Hinders Innovation?

What Hinders Innovation?

In an essay for the National Bureau of Economic Research, Heidi Williams discusses her previous research on how current IP policy fails to promote (or actively hinders) innovation.

First, she highlights the findings from her paper on (under)investment in long-term medical treatments for cancer. She found:

several sources of empirical evidence that together are consistent with private research investments being distorted away from long-term projects such as drugs to prevent or treat early-stage cancers. For example…research on cancers which require longer clinical trials because they have higher five-year survival rates is more likely to be publicly funded. A back-of-the-envelope calculation we present suggests that this distortion has quantitatively important implications for the survival outcomes of U.S. cancer patients.

While she was unable to directly link the patent system to this distortion, she did find that the clinical trial process “generate[s] a lag between the time of patenting and the time of commercialization, which reduces an invention’s effective patent life — more so for drugs that require longer clinical trials.” So, in this case we have an example of patents being insufficient to incentivize innovation in drugs that require more testing. She recommends that greater R&D funding be dedicated to these longer-term projects, a preferred alternative to pharmaceutical patenting by many economists.

In her second paper, this one on the human genome, she found that denying access to information on the human genome led to a reduction in follow-on research due to legal restrictions from other researchers accessing data on scientific discoveries:

Do intellectual property (IP) rights on existing technologies hinder subsequent innovation? Using newly-collected data on the sequencing of the human genome by the public Human Genome Project and the private firm Celera, this paper estimates the impact of Celera’s gene-level IP on subsequent scientific research and product development. Genes initially sequenced by Celera were held with IP for up to two years, but moved into the public domain once re-sequenced by the public effort. Across a range of empirical specifications, I find evidence that Celera’s IP led to reductions in subsequent scientific research and product development on the order of 20 to 30 percent. Taken together, these results suggest that Celera’s short-term IP had persistent negative effects on subsequent innovation relative to a counterfactual of Celera genes having always been in the public domain.

From these two papers, we have two potential policy solutions. One, in the case of the paper on cancer treatments, indicates that direct funding for R&D that leads to innovations that go directly into the public domain would be useful. For the second, weakening (or eliminating) IP protections on scientific discoveries would help follow-on innovators.

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By |2019-04-12T08:36:16-07:00April 9th, 2019|Blog, Intellectual Property|