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We conducted an empirical analysis to understand how IDD affected the innovative productivity of inventors. We compared the patenting productivity of inventors in states that adopted IDD to the productivity of inventors in states that didn’t adopt IDD. In all, our sample spans the 1976-2003 time period, and analyzes the patenting outcomes of over 350,000 distinct inventors over that time span, for a total of over 2.5 million inventor-year observations.

We found that IDD had a negative effect on innovation, and specifically on innovation quality (which we measured by patent counts weighted by patent-forward citations). Inventors based in states where IDD was enforced innovated less compared to before IDD took hold and also compared to comparable inventors in non-IDD states. These results continue to hold after also including a wide range of controls for differences in inventor, invention, and firm characteristics.

One way in which patented innovation reduces economic inequality is by helping those with less gain more over their lifetimes. The inventors and inventions of the previous Part hint at these paths to prosperity. Frank Ball's patents served as the basis for the Ball Engine Co., the company he co-founded with his partner. 169Before he was known as "Jack Fishman," the inventor of naloxone, Jacob Fiszman fled Nazi occupation in Poland with his parents. 170One of the inventors on the Oracle patent, who immigrated to the United States for schooling, has gone on to become a Silicon Valley executive. 171

But patents can also help those with much gain even more. Larry Ellison was one of the richest people in the world by the time he was issued the '944 [*34] patent. 172His company has ranked among the top fifty patentees 173and has used its patents to sue other large companies. 174Is patented innovation actually helping to lift incomes at the bottom relative to the top, or making the rich, and the dominant firms they work for, richer? Both, the empirical research suggests.

This article posits the following analysis: The theory of Open Innovation advocates that established firms can improve their innovative output by purchasing ideas from outside firms. Third-party innovators will participate in Open Innovation when incumbent firms possess the complimentary assets and customer relationships necessary to commercialize their innovation. Open Innovation models best yield breakthroughs when innovations from technically distant fields are incorporated into incumbent products. Innovations can only be transferred across such technical distances when parties exchange tacit know-how. Know-how transfer is fraught with risks, which are exacerbated by the bargaining power that the incumbent enjoys over the innovator. The innovator, therefore, requires patent protection in order to provide legal leverage over the incumbent. Patent protection weakens when innovations are licensed over technical distances because there is a greater likelihood that a blocking patent may be obtained on the final product. Therefore, private, reputation-based mechanisms are required to foster breakthrough Open Innovation systems.

When an innovation is initially devised, it is generally motivated by a particular use case, situated within a particular community, within a particular geography, together comprising the innovation's initial target market. But the potential market may be much broader. In the absence of tradable rights, innovative ideas and know-how are fiercely guarded as trade secrets, 210and limited in their diffusion by the capacity and desire of their owners. Patents can accelerate commercialization by making it safer and easier for innovators, working alone or with their licensees, to attract investment and partners in order to commercialize the invention and reach additional markets. Studying the growth of patent systems internationally, Petra Moser has considered how patenting chemical inventions has impacted their reach. She found that as patenting became more prevalent, inventive activity spread, leading the industry to become significantly more geographically widespread. 211Licensing partnerships are particularly important when the costs of entering a market outweigh the benefits for the originator firm, and vice versa for a local or partner firm. 212

The ability to obtain patents, including on an ongoing basis, can also enhance access to relevant inventions and formulations. It is axiomatic that without the right to exclude, the pharmaceutical industry would not exist in its present form because patents enable the recapture of the enormous costs of drug development through a period of exclusivity. As the naloxone vignette illustrates, however, the ability to seek patents on different formulations, methods of administration, or other incremental inventions also drives investment in follow-on improvements tailored to custom markets by the original innovator or a licensee. The ability to patent incremental advances does raise other problems, as described in the next subpart; however, the rents created by patents can be used [*40] to support the further development of and, ultimately, wider diffusion of the innovation.

Risks of extreme weather events due to climate change, of pandemics due to anthropogenic land conversion, and of permanent displacement due to sea level rise are all growing (Hauer et al. 2019; IPCC 2019; Gibb et al. 2020). Many of these risks are likely to rise with continued agricultural development based on land conversion and imprecise application of biochemical inputs such as antibi- otics, fertilizers, and pesticides (Rohr et al. 2019). They are also correlated with conflict risk. Uninsured risk is a primary cause of poverty traps, so rising and shifting risks increase the likelihood of rural subpopulations collapsing into chronic poverty (Barnett, Bar- rett, and Skees 2008; Barrett and Santos 2014; Barrett et al. 2019).

Recent years have also brought a growing backlash against globalization, manifest in trade restrictions suddenly enacted by dozens of governments on both agricultural exports and imports. Combined with the upward pressure on prices generally over the past twenty years, this has translated into appreciably greater global agricultural commodity price volatility (figure 2).

The United States as an Aerospace Nation: Challenges and Opportunities

In his address opening the conference, General Norton A. Schwartz, Chief of Staff of the Air Force (CSAF), pointed out how, with its inherent characteristics of speed, range, and flexibility, airpower has forever changed warfare. Its advent rendered land and maritime forces vulnerable from the air, thus adding an important new dimension to warfare. Control of the air has become indispensable to national security because it allows the United States and friendly forces to maneuver and operate free from enemy air attack. With control of the air the United States can leverage the advantages of air and space as well as cyberspace. In these interdependent domains the Air Force possesses unique capabilities for ensuring global mobility, long-range strike, and intelligence, surveillance, and reconnaissance (ISR). The benefits of airpower extend beyond the air domain, and operations among the air, land, maritime, space, and cyber domains are increasingly interdependent.

JAMES D. TAICLET: Absolutely. So what the 21st Century concept is meant to do is connect platforms—which are satellites, submarines, ships, tanks, aircraft, et cetera—to tie those platforms together across domains. So that’s space, air, ocean, subsurface ocean, land, et cetera.

So, in the case of hypersonic defense, we need satellite sensing in the early stage of a hypersonic missile launch, and we have sensors that are infrared sensors in space that can see this is happening now. We can do some tracking on the initial phase of the flight. But with the speeds that are going on and the defensive capabilities we have, we need to use these twenty-first-century digital technologies to close the loop, so to speak. So we need artificial intelligence to do the calculations and predictions of how this missile could fly. We need really high-speed connections—network connections—at the 5G level to be able to push enough data from the satellite, for example, to the command-and-control center and the fire-control computer to have the information that it needs to create a tracking solution. And then we have to be able to connect to a THAAD missile battery or a Patriot missile battery, et cetera, to actually hit the thing.

Aerospace engineering is not just a glamorous branch of engineering and technology, it is also one of the most intellectually demanding on innovative talent and a prolific source of cutting edge technologies. They must therefore be protected by intellectual property rights (IPR) especially those that embody high scientific intellectual content with potential for commercial application in ultra-high-valued products. Ideally, at the university level, imparting knowledge on IPR should therefore be part of any aircraft design curriculum. It usually is not. This paper introduces a historical perspective and provides examples of how new technologies in the past were advanced, their IPR protected and fought when patents were alleged to have been infringed. The intent is to encourage aerospace departments in universities to include IPR as a core component in their design courses.

Key words: aircraft design, intellectual property rights, patent litigation, history of aircraft design.

The open-source advocates who support the complete elimination of patent rights may allege that patent protection of proprietary information limits the accessibility of knowledge. Despite the current call for harmonized research effort from governments, academic institutions, and industry to develop COVID-19 vaccine, the unwillingness to share patentable information may prevent the collaboration.316 We argue that patent owners regularly work together under the confidentiality agreement and the open-source model provides no incentive for the profit-driven patent owners, like pharmaceutical companies, to develop cures.

In the current debate of the vaccine patent waiver, the question is whether a patent waiver (which grants the free accessibility of vaccine formulations) would facilitate the vaccine availabilities in many developing countries.317 As claimed by Harvard Law Professors Terry Fisher and Ruth Okediji, the waiver may not solve the healthcare problem at least in the near future because developing countries lack the industrial foundation to manufacture vaccines even if the vaccine formulations are provided to them. 318

D. Need of Patent Rights for Machine Learning Inventions in the Era of Big Data

The current system, on its surface, does not provide adequate encouragement for data sharing. If anything, companies have strong incentives to avoid disclosure of their training data, machine learning model, and output data.

From biopharmaceuticals to information technology, patents play a powerful role in the birth, death, and renewal of innovative industries. This Article explores patent law's underappreciated contributions to evolutionary economic change. It argues that patents contribute to churn- a continual process in which new innovations and firms challenge incumbents, which must constantly innovate or face displacement. Ultimately, the insurgents become the incumbents, and the cycle starts anew. These competitive pressures force firms to "innovate or die," thus providing maximal incentives to innovate.

In considering patent law's contribution to churn, this Article moves beyond patent scholarship's traditional micro-level focus on individual invention and explores the impact of patents on macro-level economic and industrial change. In so doing, it offers a novel interpretative gloss on many seemingly disparate elements of the patent system that contribute, both directly and indirectly, to advancing churn. The role of patents in promoting industrial churn is particularly important today given widespread policy concern over industry consolidation and enormous market power wielded by entrenched incumbents. 10 While such issues are ordinarily the province of antitrust law, patents contribute significantly to industrial evolution in which innovative insurgents continually challenge and ultimately displace incumbents, thereby rejuvenating industries.

In recent years, a great many studies of the real-world impact of patenting on innovation and economic growth (many available for free on ssrn.com) point to its beneficial effects. Arrow (1962), Griliches (1963), Schmookler (1966), Kitch (1977), Reinganum (1981), Tirole (1988), Klemperer (1990), Romer (1990), Giulbert and Shapiro (1990), Grossman and Helpman (1991), Aghion and Howitt (1992), Scotchmer (1999), and Gallini (2002) all found that patents foster ex ante innovation — meaning, they induce people to invent because of the prospect of reward.

Invention, it has been shown, is driven primarily not by genius or happenstance but rather by markets and the expectation of the profit that can be gained by securing the patent rights to new technologies. Zorina Khan of Bowdoin College and the late Kenneth Sokoloff at UCLA found that among the “great inventors” of the 19th century, “their patterns of patenting were procyclical [and] responded to expected profit opportunities.” And as Khan noted elsewhere, “Ordinary people [are] stimulated by higher perceived returns or demand-side incentives to make long-term commitments to inventive activity.”

Robert F. Kennedy’s speech, which includes his reference to the oft-quoted “interesting times” curse, applies throughout history in many contexts and, indeed, with both negative and positive connotation. While he focused on the struggles for freedom and social justice, the requisite ascendancy of the individual over the state, and the institution and integration of those ideals for the greater good, he also promoted the goals of greater global unity, cooperation and communication, which were, and could be, achieved by advances in technology. And, as noted in the excerpt, he championed “the creative energy of men.”

Intellectual Property in “Interesting Times”

Most technologies are developed by many inventors over many years, a process called “cumulative” innovation. Too often, however, early inventors get a patent on a small and perhaps insignificant piece of the technological puzzle, yet their patent covers the entire puzzle. Inventors who solve subsequent parts of the puzzle may need to pay royalties to the patentee, even if their contributions are larger.

As legal experts who focus on technology law and policy, we suggest that the problem boils down to two issues: too many patents and too little accurate information about them.

A second widely cited benefit of patent systems – although not so much in the economics literature – is the notion that patents are a substitute for socially costly trade secrecy and improve communication about ideas. From a theoretical point of view the notion that patents are a substitute for trade secrecy fails even in the simplest model. If a secret can be kept for N years and a patent lasts M years then an innovator will patent exactly when N ≤ M. Hence, only those things will be patented for which the secret would have emerged before the patent expired, while those for which the secret can be kept will not be patented. The same remains true in more complex and realistic models such as that of Boldrin and Levine [2004], see also Ponce [2007]. It is also the case that modern “disclosure” in patents is negligible – it is essentially impossible to build a functioning device or software program from a modern patent application, a fact which is especially clear since some patented ideas do not – and cannot – work. A case in point is the patent for moving information through the fifth dimension.2

A more subtle point is that secrecy may bias the type of inventive activity away from innovations that are not easily kept secret to those that can be, vice versa for patents. There is historical evidence from Moser [2004, 2005] in this direction. In 19th Century expositions of inventions, while countries without patent systems had overall rates of innovation similar to those with a patent system, they did specialize in innovations which were more easily kept secret. How strong this bias would be if no countries had patent systems – that is, whether it is true that patents encourage innovations that would not otherwise be made, or if they just shift the location of innovation from country to country – is not known.

C. Results The results provide fresh insights into how patent laws influence where firms innovate, and it spells trouble for the U.S. Patent Act. According to the random effects and OLS analyses, firms strongly consider the nature of a country’s patent enforcement system when deciding where to innovate. For example, the random effects analysis in Model 1 indicates that firms are more likely to place their R&D operations in countries where the costs of losing an infringement lawsuit are minimized, as measured by the negative and statistically significant variable of Average Damages. 194 This result was expected by our research, as those innovating a patentable good are more likely to be sued by those owning pre-existing patented technology than to sue them. As such, we find that inventors prefer jurisdictions where the prospective damages a court may issue are lessened. [table omitted] A similar conclusion is that the actual cost of litigating the lawsuit— ignoring the size of the judgment and damages rendered—helps to determine where firms innovate. Model 2 illustrates the negative and statistically significant relationship that average cost of patent litigation has on R&D Spending. This finding indicates that the actual cost of defending a lawsuit deters innovation—or, more articulately, causes inventors to place their R&D in jurisdictions where patent litigation is less costly. The OLS regressions produced similar results as the Random effects models. In Models 3 and 4, average damages was statistically significant and negative, as was average cost to defend a lawsuit, meaning that firms are likely to resist spending on R&D in countries that impose high costs on innovation in terms of both litigation and damages. These results have powerful implications for the U.S. patent system. Not only is the typical infringement lawsuit in the United States costly and drawn out, but bad faith litigants have devised ways to exploit these extraordinary costs, namely, by waging patent litigation as a means to extract settlements and impede competition.196 In comparison, the cost of litigating a patent infringement lawsuit in other countries can be less than $50,000, which is only 2% of the cost in the United States. This explains why, as we have found, inventors place their R&D programs in countries with less costly patent enforcement regimes than the United States. If the United States would like to better incentivize and retain innovation, then reforms must be made to the litigious and expensive nature of patent enforcement.

This Article is one of the first dedicated to the hidden incentives of patent law shopping.19 Using data provided to us from the Global IP Project20 Darts-ip,21 our analysis explores whether firms optimize value by placing R&D and innovation in countries with “better” patent laws. To verify our models, we interviewed notable patent attorneys practicing in the United States, Europe, and Asia. Our hypothesis is that foreign patent environments offer inventors meaningful options influencing where they choose to innovate but not in the expected ways. We find that inventors are heterogeneous with contrasting preferences depending on their stage of innovation.22 Entrenched patent owners value stronger patent rights—reflected by sizeable royalty awards, treble damages, and equitable remedies—to deter and punish acts of infringement.23 Inventors during the innovation stage, on the other hand, have incentives to develop technology where patent rights are weaker. This is because the innovation process exposes the typical inventor to liability if the inventor’s R&D has unwittingly (or intentionally) incorporated another’s patented technology without permission.24 Increasing this issue’s saliency, there are both practicing and non-practicing entities that, in asserting meritless patent infringement claims, exploit the high costs of U.S. patent litigation; this strategy is typically meant to either extract rents from inventors or frustrate efforts to develop competing technology, which may lead early stage innovators to seek out foreign patent regimes.25 As a partner at an international law firm confirmed to us, patent litigation is a common strategy used against upstart companies who have “stepped on the toes” of dominant players.26 Another practitioner witnessed “egregious” examples of large companies “steamrolling” smaller inventors using patent litigation.27 Given the average cost to defend an infringement lawsuit in the United States is roughly $3.5 million28 and royalty awards have surpassed $2.5 billion29— which inventors can potentially mitigate by innovating almost anywhere but the United States—this may explain why the United States has reportedly lost innovation. Our results generate novel empirical and theoretical insights into the way patent rights incentivize innovation. According to our quantitative analysis, some firms avoid the litigation risks of U.S. patent law by developing technology in countries that have lessened the costs and risks of patent enforcement (i.e., all the costs borne from the patent assertion and litigation processes).30 We deduce, then, that a critical and generally ignored element of patent law’s ability to promote innovation concerns where the resulting innovation takes place. It seems industry advocates and patent scholars overestimate how much innovation strong patent protection generates, while underestimating the deterrent effect of the high costs associated with patent enforcement. So, contrary to popular logic, recent congressional efforts, and industry advocates,31 our findings indicate that the increasingly common proposal to strengthen patent rights would have the opposite effect of diminishing innovation in the United States

Patents are supposed to incentivize success. Across more than 200 years, they have emerged as an important tool for advancing society by encouraging inventors to create and share successful innovations, in exchange for the right to exclude others from the market for a limited period of time.

And yet that’s not how patent law works today. Rather, we are at risk of incentivizing failure. The courts, Congress and boardrooms are advancing a simple logic that turns the patent system on its head. The consequences are on display in the pharmaceutical industry, which uses patents on successful drugs as vehicles to compensate for the losses companies incur when other research doesn’t pan out. Even worse, patents have become a way to gain an extended monopoly in the marketplace, one that reaches far beyond anything related to the drug itself.

The framers of the U.S. Constitution were not wrong. Patents did serve an important purpose during the days when technology advances happened over decades or centuries. In today’s era of exponentially advancing technologies, however, patents have become the greatest inhibitor to innovation and are holding the United States back. The only way of staying ahead is to out-innovate a competitor; speed to market and constant reinvention are critical. Patents do the reverse; they create disincentives to innovate and slow down innovators by allowing technology laggards and extortionists to sue them.

A new paper, , by Robin Feldman, of the University of California-Hastings Law School, and my colleague Mark Lemley, of Stanford Law School, dispels what doubt there may have been about the innovation value of patents. They analyzed the experience of real companies to see how often patent licenses actually spur innovation or technology transfer when patent holders assert their patents against companies. They found that almost no new innovation resulted. When patents were licensed, regardless of whether they were licensed from companies, patent trolls, or universities, they were practically worthless in enabling innovation.

C. The Patent System's Enthusiasm for Artificial Intelligence

The last section illustrated that there is much to be excited about concerning AI. The USPTO's interest in artificial intelligence signals a critical moment for U.S. innovation. Evidence suggests that the patent system is becoming less accessible to small businesses, women, and minorities. 230 Research from other domains reveals that artificial intelligence, when applied to a problem with blind technological optimism, furthers disparities in power. 231 If the U.S. ignores these trends, then it risks further alienating small businesses and innovators that have been integral to the story of U.S. innovation. This section describes the problem in further detail.