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Recently, Assistant Attorney General Thomas Barnett, gave remarks at a George Mason symposium, on the “difficulties with applying the (antitrust) concept of dominance to the market power that successful companies sometimes gain by creating new technologies and IP rights.”
This was an important lecture for several reasons. The technology industry is doing fine, with low concentration of innovating activity, consumers with endless choices in flaunting spending power, and new products and companies constantly come to the market, we consumers (you and I) are living in good times.
Yet too much policy exchange focuses on minor nic-nacs passed off as constituting consumer harm, the hyping up of unprofitable and unsustainable business models as alternatives to investment backed ventures, and decentralized amateur production called substitutes for professional work. What these views really imply is a desire to take a cut of or to reallocate existing innovation and its profitability. There is no indication of any "new" innovation that would result. In reply, Barnett states: Profit is the reward that encourages firms to invest, innovate, and compete through the mechanism of dynamic efficiency and in the words of an eminent American jurist, Learned Hand, "(t)he successful competitor, having been urged to compete, must not be turned upon when he wins."
… innovation requires recognition of the benefits of dynamic efficiency and the dangers of focusing myopically on static efficiency …forces that yield the benefits of static efficiency… can discourage innovation and dynamic efficiency if the drive toward marginal costs occurs at such an early stage that it makes innovation uneconomical… This … is sometimes described as the need to recoup R&D costs and an expected profit sufficient to induce firms to direct … capital to risky … ventures. What critics of current innovation attack most often is the IP assets of successful companies, often with the justification that IP raises transaction costs for companies already working on a margin, or that IP leaves too much regulatory uncertainty for informal innovating organizations. I can see where this latter perspective comes from, but argue that some kind of concerted industry efforts would fullfil the needed function (such as the Open Source Legal Center). On the former, Barnett comments:IPRs should not be viewed as protecting ...owners from competition; rather, IPRs should be seen as encouraging firms to engage in competition, particularly competition that involves risk and long-term investment. Properly applied, strong IP protection creates the competitive environment necessary to permit firms to profit from their inventions, which encourages innovation effort and improves dynamic efficiency.
… we cannot take capital-intensive innovation for granted. .. (IP) is under attack from the "access" and "redistribution" factions, which seek to limit or abolish copyrights and patents in order to make it easier to copy music, computer programs... Increasingly, these access and redistribution factions see "dominance" by successful innovators, meaning large market share, as a problem to be solved...
posted by Noel Le @ 6:29 PM | Markets: Business, Investment & Innovation
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