2016-09-16 Jason Furman, chair of the U.S. Council of Economic Advisors, made remarks (pdf, summary) on various trends indicating decreased competition and increased concentration in many sectors of the U.S. economy (similar in flavor to items previously noted in Labor share decline all due increasing info investment; but what impact info property? and Accounting for Rising Corporate Profits: Intangibles or Regulatory Rents?) and 4 applications of pro-competition policy (similar previously found in “Reviving Economic Growth” Cato Forum IP Extract Policy).
The first area I will discuss is in some senses the intellectually and substantively hardest: intellectual property and patent reform. In this case, of course, intellectual property protections are intended to increase innovation by granting temporary monopoly power—increasing the private rate of return to investments in research that might otherwise have been competed away. But it has also long been understood that a balance needs to be struck between the dynamic incentives conferred by intellectual property and the static costs of the monopoly power, a balance that is manifested in the finite lives and limited scope of patents, trademarks and copyrights. Moreover, it is increasingly understood that overly stringent intellectual property practices can impede innovation itself—including by reducing the follow-on innovation that so often can be important, especially in areas like technology.
These considerations have played a role in the Administration’s approach to patent policy. For example, many of the interconnected services available today require different firms to use the same standard technology. The Administration recognized that if that technology was patented, the patent holder could exercise excessive power and “hold up” the ecosystem over a “standards essential patent” that was necessary for increasingly interconnected devices to work together. In response to this, the U.S. Patent and Trade Office and DOJ came together to provide guidance to the International Trade Commission (ITC) and suggest ways to prevent that hold up—guidance that was the basis for the President’s decision to block the ITC’s exclusion order on certain smartphones based on a claim that they had infringed a standards essential patent.
A second example of the Administration’s patent policy is its work to boost patent quality and limit the ability of overly aggressive patent assertion entities to quell innovation. In 2011 the America Invents Act put in place new mechanisms for post-grant review of patents and other reforms to boost patent quality. Further, to hasten the patent litigation process, accused infringers have the opportunity to challenge the patentability of a claim through an inter partes review, which is handled by the Patent Trial and Appeal Board rather than a Federal court (which handles the appeals process) . This process for challenging the validity of a patent provides a quick, inexpensive alternative to district court litigation, and should help improve patent quality and ultimately reduce frivolous litigation.
Though it’s good to see the area recognized as important, above are weak fixes for widely recognized patent system defects rather than even a beginning of fixing the knowledge economy. Not antiturst, but not beyond antitrust either. I can’t wait for well-placed policy thinkers like Furman to even mention commons-favoring/open policy as a potent and feasible pro-competition application.
Furman also includes an important knowledge regulation and intellectual freedom topic in remarks on increasing the bargaining power of workers:
However, employers can also shift the balance of power in their favor by means that are legal in many States, including through the increasingly widespread practice of non-compete agreements. By reducing workers’ job options, non- compete agreements force workers to accept lower wages in their current jobs, and may sometimes induce workers to leave their occupations entirely, foregoing accumulated human capital (U.S. Treasury 2015). By one estimate, 18 percent of those in the U.S. labor force, or roughly 28 million people, are currently covered by non-compete agreements (Star, Bishara, and Prescott 2016). While such agreements can sometimes promote innovation through the protection of trade secrets, they are common among workers who are less likely to possess such secrets, especially lower-skilled workers (U.S. Treasury 2015).
I’ve only mentioned non-compete agreements in passing before (blog post, Broadly shared knowledge is key to broadly shared wealth), but I think they and related forms of employer-based knowledge restrictions will be a key ingredient of WPIO.
Furman also remarks on reforming land-use regulation (not directly on-topic here, but in a way the flipside of knowledge, and both should be understood to get property right) and (as an open question) digital platform monopolies (see: public big data infrastructure).