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  1. Thiru Balasubramaniam

    On September 19, 2014, the World Intellectual Property Organization (WIPO) published "Alternatives to the Patent System that are used to Support R&D Efforts, Including both Push and Pull Mechanisms, with a Special Focus on Innovation-Inducement Prizes and Open Source Development Models" (CDIP/14/INF/12), a study authored by Mr. James Love, Director, Knowledge Ecology International (http://www.wipo.int/meetings/en/doc_details.jsp?doc_id=287218).

    WIPO commissioned this study as part of the implementation of the Development Agenda Project on Intellectual Property and Technology Transfer: Common Challenges - Building Solutions) in support of recommendations 19, 25, 26 and 28 of the WIPO Development Agenda (http://www.wipo.int/edocs/mdocs/mdocs/en/cdip_6/cdip_6_4_rev.pdf).

    Reproduced below is the Executive Summary of the study.

     

    EXECUTIVE SUMMARY

     

    1. The grant of exclusive rights to use patented inventions is one of several important mechanisms for stimulating investment in innovative technologies. This paper discusses several alternatives to the grant of patent monopolies including direct government funding of research, tax policy, the creation of non-patent monopolies, mandates to fund research-based upon a percentage of product sales, and innovation inducement prizes.

    2. All mechanisms for funding, subsidizing or inducing third party investments in innovation have benefits, as well as costs and limitations.

    3. The patent system has the advantage of decentralized decision making, a reward system that can dynamically mobilize resources directly from the users that benefit from the invention, and disclosures of inventions. The costs of the patent system include high prices for products, legal barriers to the use of inventions for follow-on innovations, and the considerable costs of evaluating and enforcing patents. The patent system is also of limited value for certain research and development activities, including for the development of products with small commercial market potential, including pre-commercial research and development, research outcomes that cannot be successfully monopolized and monetized, and particularly risky development projects, to mention a few of several well-known limitations of the patent system.

    4. Each of the alternatives to the patent system likewise has advantages, as well as costs and limitations. Policy makers have the freedom to use a variety of innovation inducing mechanisms to achieve goals, either as a substitute for or a complement to the patent system. Economic analysis of the costs and benefits, and suitability of various mechanisms to achieve context specific innovation objectives is encouraged. Also, the use of several mechanisms, in combination, can be useful to overcome the glaring shortcomings of a particular mechanism.

    5. Like the patent system, other mechanisms for supporting innovation have trade related aspects, and emerging or possible global regimes of regulation.

    6. Innovation inducement prizes are an ancient mechanism that has recently found a new constituency, as both a complement or a substitute to patent enforced products monopolies. These include sui generis one-off prize contests, with ad hoc rules, and more ambitious proposals for systems of innovation prizes that would compete more directly with patent monopolies to induce private investments in R&D, or systems of research grants or contracts. The paper compares innovation inducement prizes to patent monopolies, and to research grants or contracts, in a series of stylized examples that illustrate the motivations for using particular mechanisms.

    7. The paper concludes with an analysis of competing proposals to induce innovation for new antibiotic drugs, an area of considerable market failure.