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In an attempt to grossly exaggerate China’s defense spending, and simultaneously downplay the U.S. military budget, the Federal Reserve Bank of St. Louis published a jaw-droppingly deceptive graph.

If a student presented this in a statistics 101 class, the teacher would likely give them an F. But because it involves Washington’s public enemy number one, Beijing, the U.S. regional reserve bank was awarded a Golden Star for exemplary service in the New Cold War.

Department of Political Science, University of Notre Dame; Department of Political Science, Massachusetts Institute of Technology; The defense innovation machine: Why the U.S. will remain on the cutting edge; ND International Security Center; https://ndisc.nd.edu/news-media/news/the-defense-innovation-machine-why-the-u-s-will-remain-on-the-cutting-edge/

The United States invests heavily in defense-related research and development (R&D) activities. Figure 1 shows the past 40 years of history of U.S. inputs to defense research and development. Currently the United States invests more than 75 billion USD each year in defense R&D plus billions more in Department of Energy R&D investment for nuclear weapons. That is about two-thirds of what all other countries in the world, American friend or foe, spend on defense R&D.Footnote9 China is the only great power that spends more on its entire defense effort than the United States spends on just defense R&D. Seventy-five billion dollars is more than Russia, the United Kingdom, France, Germany, or Japan spends on defense.Footnote10

Department of Political Science, University of Notre Dame; Department of Political Science, Massachusetts Institute of Technology; The defense innovation machine: Why the U.S. will remain on the cutting edge; ND International Security Center; https://ndisc.nd.edu/news-media/news/the-defense-innovation-machine-why-the-u-s-will-remain-on-the-cutting-edge/

More important, we believe that the American defense technology system is pushed toward innovation by specific contextual factors, the ‘soft’ categories of attributes and capabilities, that cannot readily transfer to likely rivals.Footnote4 First, the political culture of the United States values technology strongly: technology is assumed to be the solution to most problems, including military ones. American culture also has a strong casualty aversion driven by an economy traditionally burdened by labor scarcity and by responsive political institutions that encourage the substitution of capital for labor to keep its own people out of harm’s way.Footnote5 The All-Volunteer Force reflects this by making military service voluntary and thus making military service expensive for government and service personnel lives ever-more-valuable and in need of husbanding. Second, competition is deeply engrained in defense, as it is in most of American society, stimulating new ideas and providing a diversity of approaches to any problem, in case one technology trajectory does not work out as hoped. Competition extends among the various military services and agencies, which each seek to propose solutions to the nation’s strategic problems, and among firms with different design-team philosophies. Third, the United States also welcomes foreign ideas much more readily than other countries, given U.S. openness to immigration, especially among the highly skilled and technically expert. Finally, a Cold-War organizational innovation in the United States created special public-private hybrid organizations, Federally-Funded Research and Development Centers (FFRDCs) that offer unbiased technical advice and a mechanism for the accumulation of knowledge – a unique social, relational system for institutional memory and systems integration capability that generally works very well. Other nations, with different divisions between the public and the private and dramatically different governance institutions, cannot easily copy these capabilities. These soft innovation factors particularly emphasize American advantages in the functional category of institutional factors – norms of seeing technology as a solution, trying hard to minimise casualties, using innovation as a means of competition among organizations, and welcoming foreign ideas. The institutional factors draw from the particular American mix of organizations, notably independent military services with strong identities, competitive firms in the defense industry that readily form networks or teams of suppliers even as each maintains its own core competencies and technical habits, and FFRDCs that help keep systems integration efforts honest and less parochial and that help preserve knowledge of false-start technology trajectories and craft skills that enable high-tech systems to function well.Footnote6 Because of the robustness of America’s input factors and the difficulty of copying its unique institutional factors, we conclude that the American defense innovation system will remain at the cutting edge and will not be surpassed by a potential international rival. In the final section, we explain why American leaders are so nervous anyway.

Department of Political Science, University of Notre Dame; Department of Political Science, Massachusetts Institute of Technology; The defense innovation machine: Why the U.S. will remain on the cutting edge; ND International Security Center; https://ndisc.nd.edu/news-media/news/the-defense-innovation-machine-why-the-u-s-will-remain-on-the-cutting-edge/

The United States is the most powerful nation in the world.Footnote1 It has the most powerful military, the biggest economy, and the most dominating culture. It is the world’s leader in science, engineering, and medicine. Its universities are the most admired. Its corporations are the richest and most successful. People eat Big Macs, drink Coca Cola, fly on Boeings, use their iPhones, and watch Hollywood movies around the globe. Everyone knows the name of the American president, what the CIA does, and who you should call if there is trouble on your border. The United States is also a very secure country. It is surrounded by two big oceans and two unthreatening neighbors. Its surveillance systems scour the globe looking for dangers. It has nuclear weapons, a Navy and Coast Guard on constant patrol, an Air Force on high alert and with a global reach, and an Army and Marine Corps second to none in capability and recent combat experience. But many Americans believe that this is all slipping away, that America is becoming vulnerable and losing its power and dominance. They cite internal and external sources of the vulnerability. American power, they claim, is being frittered away by a dysfunctional Congress, an incompetent president, and a bloated, slow moving, gold-plating acquisition bureaucracy that cannot keep up. Indecision and gridlock have seemingly become the American Way of government. Meanwhile, some fear that agile rival nations, specifically including China, can tap fast moving commercial technology to build modern weapons that will defeat the United States.Footnote2 Here we examine these concerns that the American military advantage in the Post-Cold War era has dissipated in large part because the Defense Department lags behind in developing advanced technologies. Our judgment is that the American defense research and development system, as honed during the Cold War and expanded since, is fully capable of handling any military challenge. It is a gigantic technology-generating, innovation-producing, war-fighting machine. U.S. ‘hard’ innovation capabilities – ‘input and infrastructure factors’ like R&D facilities, human capital, access to foreign technology, and availability of funding – far outstrip those of its potential rivals, even though those factors are the ones often thought of as easier for catch-up countries to obtain.Footnote3 Despite warnings that the United States no longer spends enough on R&D and that Chinese R&D spending is surging, the reality is that the United States dramatically leads in military innovation investment. In functional terms, the United States dominates all other countries, including China, in ‘input factors,’ starting with resource allocations to defense research and development.

The U.S. transferred a record $80.9 billion worth of military equipment and services to other countries in fiscal 2023, a 55.9 percent increase over the fiscal 2022 level of $50.9 billion, according to the U.S. State Department.

“This is the highest annual total of sales and assistance provided to our allies and partners,” a State Department release said.

Michael E. O’Hanlon; Director of Research - Foreign Policy, Director - Strobe Talbott Center for Security, Strategy, and Technology, Co-Director - Africa Security Initiative, Senior Fellow - Foreign Policy, Strobe Talbott Center for Security, Strategy, and Technology, Philip H. Knight Chair in Defense and Strategy

Alejandra Rocha; Senior Research Assistant - Strobe Talbott Center for Security, Strategy, and Technology

Death rates from bacterial infections dropped over 90% from historic levels before the introduction of penicillin. Sanitation and vaccines are far more effective methods to control bacterial infections than antibiotics ever were or ever will be. Boring old soap and water, filtration, bleach, and alcohol kill superbugs just fine. None of these things are in short supply. The acquisition of multiple drug resistances generally (but not always) causes bacteria to become a bit less fit and unable to infect otherwise healthy adults. The victim of this particular superbug was in her seventies and had been in and out of hospitals for over a year. This is a fairly typical profile for victims of multi-drug resistant bacteria. The worst-case scenario, if we continue to abuse and overuse antibiotics in feedlots and hospitals, is that these bugs will pick up compensatory mutations and become more virulent. Many fairly routine procedures - chemotherapy, thoracic and orthopedic surgery - will become much more risky. But the risk will still be largely confined to hospitalized patients. MDR bacteria are extremely unlikely to cause a global pandemic on the scale of the 1919 influenza or AIDS epidemics, so long as we continue to provide clean food and water to the public.

As such, I believe it is important to carefully consider the probability of various proposed existential risk scenarios. In the subsequent two sections I will consider risks of engineered pandemics and unaligned artificial intelligence. Engineered Pandemics Extinction level agent exists One initial consideration that must be addressed is how likely it is that any biological pathogen can even kill enough people to drive humanity to extinction. This places an upper limit on what any biotechnology could achieve, regardless of how advanced. Note that here I am referring to an agent such as a virus or bacterium that is clearly biological in nature, even if it is engineered to be more deadly than any naturally-occurring pathogen. I am not including entities that are non-biological in nature, such as artificial nanotechnology or other chemical agents. Whilst it is impossible to determine the ultimate limits of biology, one relevant point of comparison is the most deadly naturally-occurring infectious disease. To my knowledge, the highest fatality rate for any infectious biological agent that is readily transmissible between living humans is the Zaire ebolavirus, with a fatality rate of around 90%. It is unclear whether such a high fatality rate would be sustained outside of the social and climactic environment of West Africa whence the disease originated, but nevertheless we can consider this to be a plausible baseline for the most deadly known human infectious pathogen. Critically, it appears unlikely that the death of even 90% of the world population would result in the extinction of humanity. Death rates of up to 50% during the Black Death in Europe do not appear to have even come close to causing civilisational collapse in that region, while population losses of up to 90% in Mesoamerica over the course of the invasion and plagues of the 16th century did not lead to the end of civilization in those regions (though social and political disruption during these events were massive). If we think the minimal viable human population is roughly 7,000 (which is near the upper end of the figures cited by Ord (p. 41), though rounded for simplicity), then a pathogen would need to directly or indirectly lead to the deaths of more than 99.9999% of the current world population in order to lead to human extinction. One could argue that the pathogen would only need to directly cause a much smaller number of deaths, with the remaining deaths caused by secondary disruptions such as war or famine. However to me this seems very unlikely, considering that such a devastating pathogen would significantly impair the ability of nations to wage war, and it is hard to see how warfare would affect all areas of the globe sufficiently to bring about such significant population loss. Global famine also seems unlikely, given that the greater the number of pandemic deaths, the more food stores would be available to survivors. Perhaps the most devastating scenario would be a massive global pandemic followed by a full-scale nuclear war, though it is unclear why should a nuclear exchange would follow a pandemic. One can of course devise various hypothetical scenarios, but overall it appears to me that a pathogen would have to have an extremely high fatality rate in order to have the potential to cause human extinction. In addition to a high fatality rate, an extinction-level pathogen would also have to be sufficiently infectious such that it would be able to spread rapidly through human populations. It would need to have a long enough incubation time such that infected persons can travel and infect more people before they can be identified and quarantined. It would also need to be able to survive and propagate in a wide range of temperatures and climactic conditions. Finally, it would also need to be sufficiently dangerous to a wide range of ages and genetic populations, since any pockets of immunity would render extinction considerably less likely. Overall, it is highly unclear whether any biological agent with all these properties is even possible. In particular, pathogens which are sufficiently virulent to cause 99% or more fatality rates are likely to place such a burden on human physiology such that they would have a short incubation time, potentially rendering it easier to quarantine infected persons. Of course we do not know what is possible at the limits of biology, but given the extreme properties required of such an extinction-level pathogen, in my view it is very unlikely that such a pathogen is even possible.

Challenges to Myth 5 There are two dimensions to Myth 5. The first is about the intention of would-be terrorists, and the assumption is that terrorists would seek to produce mass casualty weapons and pursue capabilities on the scale of twentieth century state-level bioweapons programs. While most leading biological disarmament and non-proliferation experts believe that the risk of a small-scale bioterrorism attack is very real and very present, they consider the risk of sophisticated large-scale bioterrorism attacks to be very small (65). This is backed up by historical evidence. The three confirmed attempts to use biological agents against humans in terrorist attacks in the past were small-scale, low casualty events aimed at causing panic, and disruption rather than excessive death tolls: (i) the Rajneesh cult’s use of Salmonella on salad bars in local restaurants to sicken potential voters and make them stay away from the polls during Oregon elections in 1984; (ii) the 1990–95 attempted use of botulinum toxin and anthrax by the Japanese Aum Shinrikyo cult; (iii) and the “anthrax letters” sent to media outlets and members of US Congress in 2001 resulting in at least 22 cases of anthrax, five of which were fatal (66, 67). The second dimension to Myth 5 is the implicit assumption that producing a pathogenic organism equates producing a weapon of mass destruction. It does not. Considerable knowledge and resources are necessary for the processes of scaling up, storage, and developing a suitable dissemination method. These processes present significant technical and logistical barriers. Drawing from her in-depth study of the Iraqi, Soviet, and US bioweapons programs (3, 4), Ben Ouagrham-Gormley explains: Scaling up fragile microorganisms that are sensitive to environmental conditions and susceptible to change — and viruses are more sensitive than bacteria — has been one of the stiffest challenges for past bioweapons programs to overcome, even with appropriate expertise at hand. Scaling-up requires a gradual approach, moving from laboratory sample, to a larger laboratory quantity, to pilot-scale production, and then to even larger-scale production. During each stage, the production parameters need to be tested and often modified to maintain the lethal qualities of the agent; the entire scaling-up process can take several years (68). The dissemination of biological agents also poses difficult technical challenges. Whereas persistent chemical agents such as sulfur mustard and VX nerve gas are readily absorbed through the intact skin, no bacteria and viruses can enter the body via that route unless the skin has already been broken. Biological agents must either be ingested or inhaled to cause infection. To expose large numbers of people through the gastrointestinal tract, possible means of delivery are contamination of food and drinking water, yet neither of these scenarios would be easy to accomplish. Large urban reservoirs are usually unguarded, but unless terrorists added massive quantities of biological agent, the dilution effect would be so great that no healthy person drinking the water would receive an infectious dose (66). Moreover, modern sanitary techniques such as chlorination and filtration are designed to kill pathogens from natural sources and would probably be equally effective against a deliberately released agent. Bacterial contamination of the food supply is also unlikely to inflict mass casualties. Cooking, boiling, pasteurization, and other routine safety precautions are generally sufficient to kill pathogenic bacteria. The most likely way to inflict mass casualties with a biological agent is by disseminating it as a respirable aerosol: an invisible cloud of infectious droplets or particles so tiny that they remain suspended in the air for long periods and can be inhaled by large numbers of people. A high-concentration aerosol of B. anthracis or some other pathogen, released into the air in a densely populated urban area, could potentially infect thousands of victims simultaneously. After an incubation period of a few days, depending on the type of agent and the inhaled dose, the exposed population would experience an outbreak of an incapacitating or fatal illness. Although aerosol delivery is potentially the most lethal way of delivering a biological attack, it involves major technical hurdles that most terrorists would be unlikely to overcome. To infect through the lungs, infectious particles must be microscopic in size – between 1 and 5 μm in diameter. Terrorists would therefore have to develop or acquire a sophisticated delivery system capable of generating an aerosol cloud with the necessary particle size range and a high enough agent concentration to cover a broad area. Overall, an important trade-off exists between ease of production and effectiveness of dissemination. The easiest way to produce microbial agents is in a liquid form, yet when such a “slurry” is sprayed into the air, it forms heavy droplets that fall to the ground so that only a small percentage of the agent is aerosolized. In contrast, if the bacteria are first dried to a solid cake and then milled into a fine powder, they become far easier to aerosolize, yet the drying and milling process is technically difficult. The Aum Shinrikyo cult struggled with dissemination (67, 69, 70). In one of its anthrax dissemination attempts, it sprayed unknown, but probably very large, quantities of a liquid aerosol (most likely crude culture, unprocessed in any way) of B. anthracis from the roof of the Aum’s headquarters building in Tokyo. For the dissemination, the Aum set up two sprayers on the roof of the eight-story building, each within a large round cooling tower. Pipes were extended from the cooling towers to tanks below, which were filled with a liquid suspension of B. anthracis. The device worked poorly, producing large droplets rather than the very fine aerosol needed for effective transmission of anthrax. It also appears the spore concentration was very low (at least five orders of magnitude below that necessary for a highly infectious wet aerosol). In another dissemination attempt, targeting the area around the Kanagawa prefectural office and the Imperial Palace, the Aum equipped vehicles with spraying devices, but according to prosecutors’ statements, the nozzle of the sprayer clogged and the operation failed. Despite its 200 m2 laboratory containing, amongst other equipment, a glove box, incubator, centrifuge, drier, DNA/RNA synthesizer, electron microscope, two fermenters each having about a 2,000 litre capacity, and an extensive scientific library, and despite its repeated attempts at dissemination, the Aum was unsuccessful in causing any disease, and in retrospect it is clear that the cult did not even make the first substantive step toward an effective bioweapon. If, despite the odds, aerosolization was achieved, the effective delivery of biological agents in the open air is highly dependent on atmospheric and wind conditions, creating additional uncertainties. Only under highly stable atmospheric conditions would the aerosol cloud remain close to the ground where it can be inhaled, rather than being rapidly dispersed. Moreover, most microorganisms are sensitive to ultraviolet radiation and cannot survive more than 30 min in bright sunlight, limiting their use to night-time attacks. One major exception is anthrax, which can be induced to form spores with tough outer coats that enable them to survive for several hours in sunlight. Terrorists could, of course, stage a biological attack inside an enclosed space such as a building, a subway station, a shopping mall, or a sports arena. Such an attack, if it involved a respiratory aerosol, might infect thousands of people, but even here the technical hurdles would by no means be trivial. Finally, even if a biological weapon had been disseminated successfully, the outcome of an attack would be affected by factors like the health of the people who are exposed to the agent, and the speed and manner with which public health authorities and medical professionals detected and were able to respond to the resulting outbreak. A prompt response with effective medical countermeasures, such as antibodies and vaccination, can significantly blunt the impact of an attack. Simple, proven ways to curtail epidemics, such as wearing face masks, hand washing, and avoiding hospitals where transmission rates might soar, can also prove effective in stemming the spread of a disease. Indeed, this aspect of a bioterrorism attack is often underplayed in scenarios like Tara O’Toole’s “Dark Winter” and “Atlantic Storm,” where the rates of contagion used are often significantly higher than those in historical cases of natural outbreaks (71).

In the decade after the Cold War, a similar process of threat identification took place as problems previously considered to be of minor, or at least of secondary, concern were promoted. Anxieties about international terrorism substantially increased during the 1990s and were set into highest relief with the terrorist attacks of September 11, 2001. Extrapolating wildly from 9/11, a terrorist event ten times more destructive than any other in history, terrorism of that sort has repeatedly been taken to present a direct, even existential, threat to the United States or to the West — or even to the world system or to civilization as we know it.6 Wild extrapolations have precipitated costly antiterrorism and antiproliferation wars and huge increases in security spending. In these ventures, trillions of dollars have been squandered and well over two hundred thousand people have perished, including more than twice as many Americans as were killed on 9/11.7 There has been a tendency to see these exercises as misguided elements of a coherent plan to establish a “liberal world order” or to apply “liberal hegemony.“8 However, the overwhelming impetus was far more banal: to get the bastards responsible for 9/11.¶ Islamist terrorism in the United States has killed some six people per year since 9/11, and far more people in Europe perished yearly at the hands of terrorists in most years in the 1970s and 1980s.9 But there has nonetheless been a tendency to continue to inflate al-Qaeda’s importance and effectiveness.¶ In fact, al‐​Qaeda Central has done remarkably little since it got horribly lucky in 2001. It has served as something of an inspiration to some Muslim extremists, has done some training, seems to have contributed a bit to the Taliban’s far larger insurgency in Afghanistan, and may have participated in a few terrorist acts in Pakistan. It has also issued a considerable number of videos filled with empty, self‐​infatuated, and essentially delusional threats.10 Even isolated and under siege, it is difficult to see why al‐​Qaeda could not have perpetrated attacks at least as costly and shocking as the shooting rampages (organized by others) that took place in Mumbai in 2008, in Paris in 2015, or in Orlando and Berlin in 2016. And, although billions of foreigners have entered legally into the United States since 2001, not one of these, it appears, has been an agent smuggled in by al‐​Qaeda. The exaggeration of terrorist capacities has been greatest in the many overstated assessments of their ability to develop nuclear weapons. In this, it has been envisioned that, because al‐​Qaeda operatives used box cutters so effectively on 9/11, they would, although under siege, soon apply equal talents in science and engineering to fabricate nuclear weapons and then detonate them on American cities.11¶ It is possible to argue, of course, that the damage committed by jihadists in the United States since 9/11 is so low because “American defensive measures are working,” as Peter Bergen puts it.12 However, although security measures should be given some credit, it is not at all clear that they have reduced the amount of terrorism significantly. There have been scores of terrorist plots rolled up in the US by authorities but, looked at carefully, the culprits left on their own do not seem to have had the capacity to increase the death toll very much.13 As Brian Jenkins puts it, “Their numbers remain small, their determination limp, and their competence poor.“14 Nor can security measures have deterred terrorism. Some targets, such as airliners, may have been taken off the list, but potential terrorist targets remain legion.15 To a considerable degree, terrorism is rare because as Bruce Schneier puts it bluntly, “there isn’t much of a threat of terrorism to defend against.“16

As a scientist, my responsibility is to separate fact from fiction, to follow evidence, not instinct. So when I read doomsday reports of a coming “antibiotic apocalypse”, I question their legitimacy. Are we really all standing on the edge of the medical precipice, about to tumble into an oblivion of death-by-superbug? We most certainly are not. The end of the world may well be on the horizon, but it surely won’t be due to antibiotic resistance. In order to understand why, you need to understand resistance: where it comes from, what it can do, and crucially, what scientists are doing about it. Predominantly, antibiotic resistance is a man-made problem. Since the discovery of penicillin in 1928, we have consistently provided the opportunity for resistance to evolve, persist and spread through the mismanagement and incorrect administration of antibiotics. We have also learned major lessons in the last decade as to where antibiotic resistance comes from and what measures we can take to control it. Some of these, such as the C-reactive protein (CRP) test – which can help detect if patients actually need antibiotic drugs or not – are proving to be highly effective, while others haven’t been and have occasionally even exacerbated the problem. Sensitivity testing before use The point is, scientists all over the world are working tirelessly to think up new and innovative solutions to the problem. Despite their best efforts, and a growing understanding of antibiotic resistance, we still sometimes get it wrong. A woman in the US recently died of an infection so incredibly resistant that “there were no antibiotics left” to treat her. Some hysterical headlines described the deadly bacteria as a “superbug resistant to all available antibiotics”, because 26 different types failed to work. But was her infection resistant to all of these before she was given the very first antibiotic? The answer is undoubtedly, no. Fundamentally, bacteria are given an opportunity to develop resistance. Sensitivity testing allows infections to be tested against different antibiotics in a lab to see if they will be effective. While this was carried out on the woman’s infection, it was already too late – somewhere along the line, she’d had too much exposure to inappropriately used antibiotics and the infection had become resistant. Sensitivity testing at the start of an infection should be standard practice. The first questions doctors should be asking are “What antibiotics will actually work against this?” and “What am I up against?” so that any prescription will be effective in the first instance. More progressive hospitals with microbiology labs are beginning to do this as a matter of course to better control and manage antibiotic resistance. There isn’t always time, for example with sepsis, which moves very fast, but for chest, skin, and urinary tract infections the results can be available within 24 hours. Treatment is then based on fact rather than a guess. If you get it wrong enough times, you get resistance. Failing to test for bacterial sensitivity early on in the infection, waiting instead until it is known that the infection is resistant, makes the scenario much worse. Claims that the use of colistin, a “last hope” antibiotic, is soaring in English hospitals is true. But this is driven by a failure to test for antibiotic sensitivity before it is too late, leading to a need to turn to colistin. Clinicians often assume everyone’s urinary, respiratory or other infection is the same, and will respond in the same way to tried and tested antibiotics. Scientifically speaking, everyone’s infection is different and should be treated as such. No apocalypse in sight Sad as the death of the woman in the US is, it is not uncommon for a death to result from resistance. Reports suggest that around 700,000 people die from antibiotic resistant infections globally each year, the majority in underdeveloped countries with poor access to healthcare. This number is predicted to rise to 10m deaths a year by 2050 if nothing is done about the problem. But “apocalypse” is the wrong word for this. The global population has doubled since World War II, when around 10m people a year died. Humankind certainly won’t be wiped out. Even if we were to face the worst case scenario by 2050, antibiotic resistance would affect about 1% of people on the planet. And that is assuming we sit back and do nothing. In fact, 1,618 scientific research papers were published on antibiotic resistance in 2015. There is lots of funding into resistance and scientists are doing lots to tackle the problem. Schemes such as the Longitude Prize – a prize for scientists that has currently set a challenge for creating a cost-effective, accurate, rapid and easy-to-use test for bacterial infections – are pushing the momentum of discovery in this area.

We are living in a society of fear, where the objectivity in estimating risks is distorted by the media and the interested parties. During more than half of a century, the feeling of antibiotic resistance as an apocalyptic phenomenon able to push our society to the high mortality rates caused by infectious diseases in the dark pre-antibiotic ages has been steadily rising. However, at the current status of modern medicine, at least in the high-medium income countries, mortality by lack of efficacy of the antibiotic armamentarium in the therapy of infections is a problem, but not a catastrophe. The threat of antibiotic resistance has many other aspects than failures of therapy in the individual patient. Among them, the increase in the frequency of severe and potentially lethal infections, as bacteremia, the population biology alterations of the healthy microbiota, the global acceleration of bacterial evolution by selecting natural genetic tools mediating microbial interactions, and, most importantly, by modifying the equilibrium and composition of environmental microbial communities. All these threats have huge implications for human health as members of a Biosphere entirely rooted in a menaced microbiosphere.¶ Introduction¶ Along the last decades, research on bacterial antibiotic resistance has been steadily growing and now constitutes one of the fields with higher expansion in the frame of microbiological sciences. The main driver pushing research in that direction is the assumption of the urgency of solving a potentially catastrophic problem for human health. A curious epistemological problem is that scientific efforts are frequently directed to investigate and solve problems that have not been sufficiently scientifically dimensioned. Once science provide initial results, the door for new questions is opened, new knowledge opportunities are offered, and the unstoppable temptation of following the trend creates a powerful research stream that orientates the future of our endeavors. The case of antibiotic resistance fits with this view. In this opinionated updated review, recapitulating a previous dissertation (Baquero 2016), we are examining the risks associated with antibiotic resistance in a critical way and trying to evaluate the dimension of the burden of resistance as a homeostatic reaction of the microbial world to the anthropogenic aggression resulting from the industrial production and medical (human, veterinary, agricultural medicine) use of antibiotics, which can affect the health of humanity.¶ From ecstasy to fear¶ Few events in the history of microbiology have had such a wide impact in collective appreciation of the society as the discovery and extended use of antibiotics in the successful treatment of infectious diseases. Bacterial diseases were the highest cause of human mortality before the 40 s, probably including complications of viral diseases, as in the 1918’s influenza pandemic (Klugman et al. 2009), and that following the “tragedy of tuberculosis” killing so many young and romantic people along the nineteenth century. Suddenly, antibiotics, the “miracle drugs” (Moore 1999), sharply reduced morbidity and mortality and certainly contributed (by reducing complications) to the progress of advanced surgery, from war surgery in the 1940s–1950s to organ transplantation, anti-cancer immunodepressive therapy, and in general intensive care facilities. All of this was perceived by the society at large as a spectacular achievement of microbiological and chemical research.¶ The discovery of antibiotic resistance appeared as a disturbing storm-cloud in this clear sky. However, the 1940–1980 period offered a continuous wealth of new antibiotics, with a crucial participation of Spain, even in later periods (Mochales 1994). Interestingly, such a continuous progress in discovery was mostly fostered by the necessity of “fighting new antibiotic resistances,” following a kind of Red Queen dynamics, where the new discoveries compensated for the emergence of new resistances in bacterial pathogens. There is no doubt that the marketing activities of pharma companies contributed to a “replacement dynamics” to outcompete “older” drugs that could become inactive because of resistance. This strategy has strongly influenced the notion of “the unbearable threat of resistance,” and in fact many international surveys on antibiotic resistance in the world were financed by pharma companies, mostly in order to demonstrate the “superiority” of their new drugs over the old ones, but also providing an extremely useful body of knowledge on the epidemiology and ecology of antibiotic resistance. In parallel, the antibiotic “replacement strategy” was also boosted by launching less-toxic drugs, sometimes overstating few and transient, or controllable, toxic events of the “older” ones.¶ From the mid-1980s of the past century, the rhythm of discovery of novel antibiotics was gradually slowing, in part due to pharma investments being directed mostly to other drugs either much more expensive (as anticancer drugs) or prescribed for life (as anti-hypertensive, anti-cholesterolemic). Note that implicitly this indicates that most infections could be successfully treated in practice with the current antibiotic armamentarium, and the demand for new miracle anti-infectives had been weakened. However, the fear of a catastrophic return to all the horrors of a pre-antibiotic era has not only been maintained but has significantly increased, and all national and international organizations, including the WHO, situate antibiotic resistance among the top risks for public health (World Health Organization 2019); ad-hoc public–private research organizations have been created by the European Union, as ENABLE, within the IMI initiative, to stimulate research for new anti-infectives active on multi-resistant (“bad-bugs”) pathogens (Kostyanev et al. 2016).¶ Antibiotic resistance in the society of fear¶ In modern Western countries, in our developed world, a world of wonders, there is a dominant “culture of fear” which takes the form of the Alexis de Tocqueville (1805–1859) paradox: “plus tout va bien, plus on a peur” or “the better things are, the more fear we have.” Frank Furedi argues that most societal perceptions of risk, controversies over health, the environment, and technology have little to do with science or empirical evidence but are essentially shaped by cultural assumptions about human vulnerability, a kind of “kidulthood” of our society (Furedi 2007). Certainly, such a “kidulthood” favors the general manipulation of the society, either promising unfeasible “miracle” solutions or unnecessarily scaring our hopes of progress. The “threat” of antibiotic resistance is inserted in this global feeling of fear.¶ Of course, fear produces unwanted secondary effects. First, fear, as a cultural construct, tends to fix as proved the worse expectations. Second, it establishes a false equivalence, a fallacy, identifying situations to which we are scared of and those that are really dangerous. Third, the maintenance of a continuous fear without obvious solutions discredits scientific efforts; we have been speaking for too long (decades) about the urgent need to solve the problem of antibiotic resistance. Fourth, as a thought derived from the former, fear might convince us that “we are at the mercy of nature,” a deleterious thought for the societal appreciation of science. Fifth, and as suggested before, fear might be promoted, sustained, and exploited by interested parties, in the words (the parenthesis is mine) of one of my closest friends, “antibiotic resistance was a great career (and business) opportunity” (Levin 2017).¶ Fear has also positive aspects. First, it fosters the rapid analysis and counteractive responses of humans to confront microbial menaces, as occurred with AIDS, or currently with COVID-19 pandemics, but certainly it also contributed to open the golden age of antibiotic discovery. As early as in 1954, the British physician Lindsey W. Batten (1889–1981) declared: “We may come to the end of antibiotics. We may run clean out of effective ammunition, and then how the bacteria and moulds will lord it.” Second, the known interaction between emotion and creativity (Averill 2000) stimulates motivation and innovation in science. Third, fear improves social and organizational cooperation, and certainly fear to antibiotic resistance has significantly contributed to the interaction of scientists all around the world. Fourth, fear raises our awareness not to stop progress in any sense for the profit of a single humanity.¶ The apocalyptic landscape and the problem of public communication¶ Fear in antibiotic resistance has been amplified by the news in the media, worldwide known as passionate apocalyptic lovers. An indicative random selection of press titles is: “Antibiotic apocalypse: doctors sound alarm over drug resistance (The Guardian), “Antibiotic apocalypse warning” (BBC News Health), “Antibiotic resistance could be much worse than EBOLA” (Yorkshire Post). But not only the media, also serious institutions and journals: “Return to a pre-antibiotic era?” (The World Academy of Sciences), “A return to the pre-antimicrobial era? (Science). “War against superbugs” is a metaphor also forming part of this catastrophe discourse, which has been analyzed both in its rhetorical form, and in the implicit political, and professional function (Nerlich 2009). Metaphors used by the media are easily understood, but the resulting understanding can be deeply biased (Brossard 2013). Scientific communication is frequently obliged to a distortive simplification (Ortín and Uranga 2021), which in alliance with our innate human attraction for tragedy produce apocalyptic mental “monsters” (Francisco de Goya dixit).¶ The biased contribution of susceptibility testing, etiological attribution, and metagenomics¶ A main problem for the objective estimation of the consequences of a biological phenomenon is the accurateness of the methods measuring the biological parameters and criteria used to define the qualities of the system. Clearly, the burden of antibiotic resistance is estimated according to the definition of “resistance”. In vitro susceptibility testing provides “minimal inhibitory concentrations” (MICs), that, in practice, have been frequently taken as the single parameter for classifying a bacterial isolate into the “resistant” category. If the MIC is over a critical breakpoint, the organism is resistant. Therefore, the lower breakpoint, the higher the proportion of resistant strains in the species, and the feeling of “untreatable” bug. Of course, the advantage of establishing low breakpoints is to detect “first mutational steps” in the evolution of resistance, eventually preventing clinical resistance (Baquero 2001). But tagging such strains as resistant ones might have perverse consequences in the treatment of infections. In most cases infections caused by low-level resistant bacteria can be successfully treated with the antibiotic-in-case, and that obliged the international susceptibility testing agencies to “raise the breakpoint” to allow the use of the drug; typically, that has occurred for penicillins in Streptococcus pneumoniae with PBP mutations, or for carbapenems in Escherichia coli harboring carbapenemases.¶ A second problem was the common confusion (mostly for clinicians) between acquired resistance and natural antibiotic resistance. Many opportunistic non-commensal pathogens are intrinsically resistant to antibiotics, but, when they were listed among harmful human organisms, the feeling was that “antibiotic resistance” was widespread. In fact, in most cases these organisms have a low pathogenicity for patients but can be found in human mucosa, particularly in intensive care units where environmental members of the orders Pseudomonadales, Flavobacteriales, or Enterobacterales are present in water systems, not only from built environments (as sinks), but also medical equipment, as ventilators. The detection of these organisms in clinical samples is frequently a poor etiological value, but the alerted clinician might consider these (frequently intrinsically resistant) organisms at the time of therapy, increasing the awareness of “antibiotic resistance.”¶ Finally, the recent boom of microbial metagenomics has contributed to overstate the perception of a widespread antibiotic resistance, listing a number of resistance genes (genes whose loss increase susceptibility) probably approaching 10,000 in currently available curated databases. The ensemble of resistance genes in a microbiome is the “resistome,” accurately detectable by targeted capture metagenomics (Lanza et al. 2018). But resistance genes are simply everywhere and have been there for thousands of millions of years. The equivocal concept is “a bacterial organism carrying a resistance gene is a resistant organism.” The question is not “what is a resistance gene?” but “what is a resistance gene imposing a risk for therapy and public health?” (Martínez et al. 2015).¶ Back to the pre-antibiotic era?¶ This statement is simply an over exaggeration. History never comes back again, and we will never be back in the dark ages of deadly infections. Not only antibiotics are responsible for the decline in infectious diseases. In fact, infectious diseases started declining much before the discovery of antimicrobial agents, because of the progress of hygiene-ecology and social welfare (McKeown 2016). On the other hand, except in rare cases of organisms producing deadly poisoning toxins, bacteria “start a pathogenic process” that is generally amplified by the reactive host pathophysiology, as in the case of potentially deadly processes (septic shock) following the immunological recognition of molecules present in bacterial envelopes, as lipopolysaccharides or teichoic acids, without any microbial active intervention. Progresses in medicine are able to control in our days most of these host processes. In fact, many severe infectious diseases can now be cured without the need of antibiotics. A case-in-point is therapy of (once deadly) infectious diseases, as was cholera, where the lethality has almost disappeared just because of the introduction of oral rehydration therapy, without further need of antibiotics (Guerrant et al. 2003). At hospital level, progresses in the procedures of intensive care units care are able to compensate for most of the complications caused by either susceptible or resistant bacteria involved in severe infections. We will never be back in the pre-antibiotic era.

Senior counsel @ Arnold and Porter; 10 Years Later—Impact of eBay on Patent Injunctions in the Life Sciences; Arnold & Porter firm; https://www.arnoldporter.com/en/perspectives/publications/2016/06/2016_06_21_10_years_later_impact_of_ebay_13037

Where Are We Now? The more things change, the more they stay the same. At least this is true for most life sciences cases in a post-eBay world. While many recent case law developments have tended to limit patentee rights and make enforcement more difficult (e.g., the rising § 101 and §112 definiteness bars and the availability of new post-grant procedures), eBay’s requirement that courts apply the traditional four-factor injunction standard for patent cases has not drastically affected the ability of life sciences companies to obtain injunctions after determinations that their patents were infringed and not invalid. Patentees do, however, have to make more of an effort now than pre-eBay to prove irreparable harm and the inadequacy of monetary damages. For life sciences companies where the value of market exclusivity is paramount, these first two factors should be relatively straight-forward to establish in most cases. However, they may be overcome by the public interest factor, which continues to be the most common barrier to an injunction for life sciences companies. And where market exclusivity is not of paramount value to the patentee (as demonstrated through licensing practices), or where the public interest would objectively be disserved by an injunction, declining to seek a permanent injunction may save valuable time and resources while maintaining credibility with the court and the public. The last decade of patent injunction case law provides some lessons learned. A few key take-aways for life sciences companies seeking to enforce their patent rights include: Consider the injunction case during pre-litigation due diligence to decide whether an injunction would be appropriate based on public interest implications and also whether it is worth the necessary time and resources to mount a fact-intensive injunction case based on the likelihood an injunction would be granted; If the company decides to seek an injunction, start marshaling the evidence early to be able to create a sufficient record to establish that the eBay factors favor an injunction and rebut any anticipated arguments against an injunction; Especially if the infringing product is already on the market, identify prospective harms, such as specific customers the patentee may lose to the competitor, the company’s plans to reduce prices to compete, and the quarter-over-quarter loss of market share that will likely continue if the infringing activity is not enjoined. To prove irreparable harm and inadequacy of monetary damages: Build the story and evidence to show the importance of the right to exclude and market exclusivity to the company’s business model, and the parade of horrible harms that would occur if forced to license valuable patent rights to a competitor or other player in the market; and Explain why existing license agreements, if any, do not mandate a finding that monetary damages would be adequate; for example, because the licenses were not to competitors, were to small, non-threatening market players, or were cross-licenses with other companies (even competitors) where the value of the agreement exceeded the patent rights because they ended lengthy, expensive litigation. To prove an injunction would not disserve the public interest: If possible, seek an injunction prior to the launch of the infringing product to preclude a public interest argument of physician or patient preference for or reliance on the infringing product, and also make the point that any alleged benefit to the public is mere speculation; If the infringing product has already launched, marshal evidence that it does not provide patients with any concrete medical or safety benefits beyond the patented products already on the market; and Where the public interest factor may militate against a complete injunction, be creative in fashioning requested injunctive relief to minimize effect on public interest while preserving as much market exclusivity as practical. In sum, while eBay has not dramatically altered the landscape for patent cases in the life sciences industry, it has created some curves in the road to obtaining permanent injunctions—curves that can best be traversed by understanding the trends in the post-eBay case law and preparing accordingly.

Yet patents are not the only means of promoting product commercialization. Newly approved drugs and biologics, for example, receive a period of market exclusivity during which time no other party can sell a generic or biosimilar version of the product. Newly approved biologics, for instance, receive a twelve-year exclusivity period in the United States. Because of the length of time it takes to get a new biologic approved, the market exclusivity period may exceed the term of any patent an originator company has on its product. A heightened bar to patentability may lead to greater reliance on alternative forms of intellectual property protection such as market exclusivity, prizes, grants, or tax incentives. 223¶ With regards to disclosure, without the ability to receive patent protection, owners of inventive machines may choose not to disclose their discoveries and rely on trade secret protection. However, with an accelerated rate of technological progress, intellectual property holders would run a significant risk that their inventions would be independently recreated by inventive machines.¶ Depending on the type of innovation, industry, and competitive landscape, business ventures may be successful without patents, and patent protection is not sought for all potentially patentable inventions. 224 In fact, "few industries consider patents essential." 225 For instance, patents are often considered a critical part of biotechnology corporate strategy, but often ignored in the software industry. 226 On the whole, a relatively small percentage of firms patent, even among firms conducting R&D. 227 Most companies do not consider patents crucial to business success. 228 Other types of intellectual property such as trademark, copyright, and trade secret protection, combined with "alternative" mechanisms such as first mover advantage and design complexity may protect innovation even in the absence of patents. 229 ¶ Reinforcing Democracy¶ Answering these questions is a necessary first step to right-sizing the challenge posed by the spread of digital technologies that can be used to enhance the power of the state — whether to combat terrorism or repress dissent. Exaggerating the threat posed by technology could lead to the mistaken conclusion that combating the global spread of surveillance technologies will be enough to secure democracy.¶ At the same time, liberal governments and organizations can help draw attention to examples of governments that have chosen to roll back or constrain the use of digital authoritarianism and predatory surveillance techniques. Just as nonproliferation experts have studied countries that chose to dismantle their nuclear weapons programs voluntarily, so might democracy and privacy experts hold up the path taken by citizens and elected leaders who have worked to roll back and constrain technologies that were promoting illiberal practices.¶ Ecuador, which installed a Chinese monitoring system in 2011, began an investigation into its abuses under the new administration that came to office in 2017, including opening its records to The New York Times. The story highlighted China’s export of digital authoritarianism, but it is equally or perhaps more interesting as a story of the conditions under which democratic institutions and publics can say “no” to the excesses of digital surveillance by replacing “illiberal democrats” at the ballot box.¶ Even within liberal democracies, some localities have taken preemptive measures against tools of digital authoritarianism. For instance, in 2019 the cities of San Francisco and Somerville banned local agencies, including the police, from using facial recognition technology. The state of California also enacted a ban on the use of facial recognition or biometric surveillance in police body cameras, holding that “facial recognition and other biometric surveillance technology pose unique and significant threats to the civil rights and civil liberties of residents and visitors.”

The more things change, the more they stay the same. At least this is true for most life sciences cases in a post-eBay world. While many recent case law developments have tended to limit patentee rights and make enforcement more difficult (e.g., the rising § 101 and §112 definiteness bars and the availability of new post-grant procedures), eBay’s requirement that courts apply the traditional four-factor injunction standard for patent cases has not drastically affected the ability of life sciences companies to obtain injunctions after determinations that their patents were infringed and not invalid. Patentees do, however, have to make more of an effort now than pre-eBay to prove irreparable harm and the inadequacy of monetary damages. For life sciences companies where the value of market exclusivity is paramount, these first two factors should be relatively straight-forward to establish in most cases. However, they may be overcome by the public interest factor, which continues to be the most common barrier to an injunction for life sciences companies. And where market exclusivity is not of paramount value to the patentee (as demonstrated through licensing practices), or where the public interest would objectively be disserved by an injunction, declining to seek a permanent injunction may save valuable time and resources while maintaining credibility with the court and the public.

By empirically examining how antitrust regulation of patent-enabled monopolies affects follow-on innovations, this study advances the broad policy discussion on interactions between antitrust and patent laws in shaping innovation. As intensively discussed by scholars (Katz and Shelanski, 2005; Sidak and Teece, 2009), the necessity of incorporating “technological innovation” into modern antitrust law by accounting for the Schumpeterian perspective has received increasing recognition from the antitrust law community. The Schumpeterian view posits that market competition and technological innovation are mutually and dynamically influenced in the so-called “innovation cycle.” Firms that are not dominant market players may enjoy monopolistic market profits through future innovation. In contrast, a dominant market player may lose its monopolistic market position due to a competitor's innovation. The dynamics therein create incentives for firms to innovate. This scholarship leads to the important question of how antitrust law jointly shapes market competition and innovation. Our study contributes to this discussion by empirically showing that “patent consolidation” by firms is a venue where enforcement of antitrust law promotes market competition and technological innovation. The remainder of this paper is structured as follows. Section 2 reviews the literature on patent pools and cumulative innovation to derive our main hypothesis. Section 3 describes the data and methods for empirical analysis. Section 4 presents the findings, and Section 5 discusses the implications. 2. Literature review and hypothesis development 2.1. Antitrust law, patent consolidation, and market competition Patent transfer can be subject to antitrust regulation because it may enable patent consolidation that allows a few firms to control access to key patented technology for products and thereby effectively monopolize the downstream market (Figueroa and Serrano, 2019; Hahn, 1984). In the United States, two legislative acts have enabled the regulation of patent transfers: the Sherman Act and the Clayton Act. The Sherman Antitrust Act (26 Stat. 209, 15 U.S.C. §§1–7) was enacted in 1890 to regulate unlawful market monopolies. This act enables the regulation of business practices that may discourage market competition. Meanwhile, the Clayton Act was enacted in 1914 (38 Stat. 730, 15 U.S.C. §§12–27, 29 U.S.C. §§52–53) to specify which business practices violate the Sherman Act, elaborating on its antitrust law enforcement scheme and legal remedies. Section 7 of the Clayton Act is considered the foundation for the antitrust regulation of patent transfers. The section states that the federal authorities may regulate business practices that may harm market competition or lead to the formation of a market monopoly. Based on this section, patent transfers that could harm market competition or result in a monopoly are thus subject to regulation (Gotts and Sher, 2012; Klitzke, 1980). Then, under what conditions patent consolidations by a firm may negatively affect the market competition? The scholarly discussion on patent pools and their impact on market competition provides a hint for the answer. Studies have argued that amassing “complementary” patents through patent pooling by a few firms can spur downstream market competition by addressing the so-called patent holdup or patent thicket problem (Ebersole et al., 2005; Merges, 1999; Shapiro, 2000), which enhances market efficiency (Gilbert, 2004). For instance, when each of the two competing firms owns mutually complementary patents for a product, they may experience significant difficulty in bringing the product to the market because one's patent will hold up another's market operation (i.e., patent holdup). In this case, the problem can be solved by pooling the two firms’ patents and agreeing on the free use of pooled patents. In contrast, firms aggregating “substitute” patents for essential technology for a product may deter market competition if members of the patent pool are not allowed to license their patents to third parties independently (Lerner et al., 2007; Lerner and Tirole, 2004, 2007). In this case, the patent pool induces collusion by members, thereby resulting in an excessive concentration of market power in the patent pool members. However, scholars have also argued that this anticompetitive effect may not be substantial when the independent licensing by patent pool members with third parties is allowed. This is because independent licensing will lead the pool members to compete with one another on “licensing out” of owned patents to third parties; thus, third parties can access the pooled patents at a competitive price. A firm's patent consolidation via patent transfers can be seen as the special case of patent pooling by a “single” firm without the competition effect of independent licensing. In this case, the discussion briefed above suggests that a firm's patent consolidation by patent transfer brings an anticompetitive effect when the consolidated patents are on substitute technology. 2.2. Patent consolidation and innovation For innovation, firms’ patent transfers may bring both positive and negative impacts. On the one hand, a patent transfer facilitates the efficient reallocation of patents to those who can use the patents more effectively (Galasso et al., 2013) while promoting innovator's specialization in developing ideas (Lamoreaux and Sokoloff, 1999). For firms, transferring patents can be a useful instrument in terms of managing their intellectual property (IP) assets. For instance, firms liquidate their patents when they reconfigure their business lines (Serrano and Ziedonis, 2019) and finance operations (Hall, 2019; Hochberg et al., 2018) or when they want to acquire patents from outside to capitalize on emerging technological opportunities (Kelley, 2011). Meanwhile, as Kitch (1977) hinted, an upstream firm's consolidation of patents could enable the firm to mitigate downstream patent races, thereby enhancing the upstream firm's innovation appropriability. On the other hand, patent transfer enables firms to aggregate patents on important technology for product development, which may negatively impact the innovation activities of competitors by equipping the patent-aggregating firm to impose ex-post patent holdup risk to the competitors’ market operations. Indeed, Kwon (2020) showed firms’ incentives to purchase patents to leverage market competitor's ex-post patent holdup risk. Doing so can effectively increase the rivals' operating cost while making them less active in developing the relevant technologies around the transferred patents. The detrimental impact of a firm's patent transfers on innovation could be acute when innovation is developed in a highly cumulative manner (Rai, 2001; Scotchmer, 1991) and a firm's patent enforcement is effective in deterring its competitors’ R&D activities (Lampe and Moser, 2010). This is because patenting the technological inputs for a product could prevent the diffusion of that technology for follow-on innovation (Galasso and Schankerman, 2015). This is advantageous for firms seeking the monopolistic market profit (Figueroa and Serrano, 2019; Hahn, 1984). Studies attempted to find empirical evidence (Galasso and Schankerman, 2015; Murray et al., 2016; Murray and Stern, 2007; Sampat and Williams, 2019; Walsh et al., 2003, 2007). For instance, by analyzing the data on public Human Genome projects and Celera's gene-level intellectual property rights (IPRs), Williams (2013) showed that the firm's claim on gene-level IPRs significantly hampered subsequent scientific research and product developments for a long time even though the firm owned the IPRs for a short term. By using the patent–paper pair approach, Murray and Stern (2007) showed that granting patent rights on scientific discovery decreases the diffusion of scientific discovery, indicating that the subsequent scientific research is hampered by patenting. Murray et al. (2016) reached a similar conclusion by showing that the event of the National Institute of Health's agreements on reducing costs to access genetically engineered mice in the late 1990s diversified the pathways of subsequent research and innovation. Based on this finding, they argued that limited access to existing knowledge by patents might have limited the subsequent research diversity. Galasso and Schankerman (2015) showed that the invalidation of patents induced more subsequent inventions, and this effect was particular in the complex technology field where innovation is developed in a highly cumulative manner. The software sector is one of the “complex technology” areas where innovation is created cumulatively and patent enforcement is effective for market competition. A computer program (i.e., software) is often built cumulatively (Bessen and Maskin, 2009; Cohen and Lemley, 2001; Hall and MacGarvie, 2010; Noel and Schankerman, 2013) on previously developed software—the extent to which one can access the source code of the prior version of the software is crucial for the new software development (Ghidini and Arezzo, 2013a). Meanwhile, software patents are important complementary assets for appropriating software innovation (Fosfuri et al., 2008). Accordingly, in the software sector, owning software patents is crucial for market operations and for seeking strategic benefits in market competition. Indeed, Wen et al. (2013) empirically showed the deterrence of the overall OSS development activities due to software patent enforcement by proprietary companies against the Linux community (OSS). Accordingly, in the software sector, a firm's consolidation of software patents may result in deterring the software innovation activities of competitors. Our discussion above suggests that when the cumulative innovation is crucial for firms' market operation and patent enforcement is effective, a firm's consolidation of patents on key technology for the cumulative innovation process could discourage the follow-on innovation of its competitors. In sum, our literature review hypothesizes that a firm's consolidation of the substituting patents on key technology for the cumulative innovation process may bring the anticompetitive effect, which then becomes the subject of the antitrust regulation. In this case, antitrust regulation of patent consolidation could positively affect the follow-on innovation of the patent-consolidating firms’ competitors. More formally: When a firm consolidates patents on substitute technology for what it already owned, the antitrust regulation of such patent consolidation positively affects its market competitors’ follow-on innovation.1 In the next section, we describe our empirical strategy to test the formulated hypothesis. 3. Empirical setting 3.1. Regulation of Novell's software patents transfers The empirical work of this study is based on the case of the DOJ's intervention into Novell's software patents transfer to CPTN in 2011. Novell's primary business domain was the Linux-based OSS market. It was also a founder of the Open Invention Network (OIN), the largest nonaggressive defensive patent pool for the Linux community. By joining the OIN licensing program, firms could freely use the patents that are shared through OIN. In return, the OIN licensees and member companies (Novell, Red Hat, IBM, Philips, Sony, and NEC) were obliged to share their patents with other OIN licensees. In 2010, Attachmate Inc. (hereafter, Attachmate) announced its decision to acquire Novell Inc. Before the acquisition, Novell tried selling about 800 Linux-related software patents to CPTN, a consortium of the four large proprietary software companies (MS, Oracle, EMC, and Apple).2 A two-stage patent transfer process was planned. In the first step, CPTN was to acquire all the Novell patents. In the second step, CPTN was to redistribute the acquired patents to its member companies. For this deal, the four companies of CPTN paid $450 million in cash. Before December 2010, the members of CPTN have not been known except MS.3 In early December 2010, the German Federal Cartel Office (Bundeskartellamt) fully disclosed the members of CPTN. After this information disclosure, the Open Software Initiative (OSI) requested the German authority to investigate if Novell's patent transfer to CPTN members has violated German antitrust law. In late December 2010,4 two OSS advocates, namely, OSI and the Free Software Foundation (FSF), sent a joint letter to the DOJ to express their concern that Novell's patent transfer would destroy the Linux community and consequently deter its innovation. They argued the following: • Novell was dedicated to promoting the Free/Libre and Open Software while using their patents primarily for defensive purposes. • Linux software is the major competitor of the products of CPTN member companies. • CPTN member companies have major market shares in the operating systems, virtualization software, and middleware markets.5 The OSI and FSF were concerned that CPTN members might use Novell patents to prevent further development of OSS. They feared this because the CPTN members were not obliged to share their patents with the Linux community and they have a strong motivation to deter the development of the Linux-based software for market competition. The DOJ responded to this concern by starting an investigation into whether Section 7 of the Clayton Act was violated by Novell's patent transfer. According to the disclosed information, the DOJ requested detailed information about the patent transfer deal from CPTN in late January 2011.6 The 8-K document filed by Novell reports an additional request by the DOJ for further information about the deal in March 2011.7 On April 20, 2011, the DOJ announced its decision to intervene in the deal to address the immediate antitrust concern. The intervention was a partial prohibition of the patent transfer. First, MS was not allowed to retain any Novell patents. The regulation required the transfer of patents that MS is planning to acquire to CPTN and then transferred back to Novell. Consequently, neither MS nor the other three CPTN members could acquire titles to these patents. Second, EMC agreed not to acquire 33 virtualization software-related patents (i.e., virtual machine technology) because EMC was considered the dominant player in the virtualization software market.8 Third, all the patents retained by Novell became subject to GPLv2 and OIN licensing. Thus, even though Novell disjoined the OIN, these patents were being shared with the Linux community through the OIN license program. In testing our hypothesis, the DOJ's partial regulation of Novell's patent transfer is a useful case. The CPTN members were the dominant software market players who already owned many software patents that substitute for the Novell patents. Meanwhile, the member companies of the OIN were the primary entities that led the Linux-based OSS development to compete with the CPTN member companies’ software products. The software patent is the crucial complementary asset for OSS appropriation (Fosfuri et al., 2008), whereas IPR protection on software could be damaging to follow-on software developments by those who have no accessibility to the patents (Ghidini and Arezzo, 2013a). Therefore, the CPTN members’ acquisition of the OSS patents from Novell could hamper the software market competition and the OSS innovation. Accordingly, the case of the DOJ intervention into Novell patent transfer meets the conditions of which our hypothesis is likely to support. Moreover, the quasi-experimental features of the case allow us to conveniently conduct causal analysis. The DOJ's intervention was a result of the German authorities’ disclosure of the list of CPTN members. Hence, the DOJ's regulation was an exogenous event to the involved parties in the patent transfer deal. More importantly, the DOJ's intervention was not to regulate the transfer of a specific set of patents that were particularly important for Linux software development. Instead, the DOJ prohibited the transfer of patents that MS tried to acquire. 3.2. Overview of empirical analysis Our econometric strategy consists of two analyses. The first analysis is the patent citation analysis. By considering the patent citations accrued to a patent of interest (i.e., patent forward citation) as the proxy for the number of generated follow-on innovations (e.g., Drivas et al., 2017; Galasso and Schankerman, 2015), we estimate the difference in the forward citation counts accrued to the transfer-regulated patents (hereafter, regulated patents) and the transfer-allowed patents (hereafter, transferred patents) after the DOJ's intervention. To this end, we employ the following three complementary econometric methods: cross-sectional data analysis with selected control variables, panel difference-in-differences (DID) analysis, and the synthetic control (SC) approach. If the DOJ's partial regulation of patent transfer was effective to prevent the damaging impact on the follow-on innovation activities of the OIN member companies (i.e., the competitors of the patent-consolidating firms), we expect that the forward citation count of the regulated patents originated from the member companies of OIN should be greater than the forward citations accrued to the transferred patents, after the DOJ's intervention. We additionally conducted several supplementary analyses to rule out rival explanations. The second analysis is to complement patent citation analysis. Although the patent citation is useful information for measuring the follow-on innovation, not all innovations are patented nor do patents represent innovation. Furthermore, the patent citation rate is often low; thus, measuring the causal impact solely by using patent citation analysis may suffer from the measurement error. To overcome this limitation, we analyze software trademark and copyright-filing activities of companies as alternative measurements of their software innovation activities. Our analysis examines whether the member companies of the OIN experienced a decline in software trademark and copyright-filing activities after the partial transfer of the Novell patents to the CPTN member companies. 3.3. Data We start by identifying the US patents that were subject to the patent transfer deal between Novell and CPTN by using USPTO patent assignment data (Graham et al., 2018). Our initial search identifies 866 patents. Among them, 760 are the granted patents, which we include in the sample. In the empirical analyses, we use a variable that counts the number of patent citations accrued to the patent in question beginning 4 years before the DOJ's intervention date (i.e., April 20, 2011) as a control variable. To avoid the truncation problem in the use of this variable, we exclude the patents that were filed after April 21, 2007, resulting in 432 patents in our final sample. For each patent in the data, we identify which member company of the CPTN became the new patent owner by searching for the patent ownership change history made by CPTN as the patent assignor after April 2011.9 Among the 432 patents, 97 (22.5%) patents were transferred to Oracle (September 2011), 100 patents (23.2%) were reassigned to Apple (June 2012), and 109 patents (25.2%) were transferred to EMC (September 2011). Meanwhile, the rest of the patents (126 patents, 29.2%) were transferred back to Novell (September 2011). The DOJ ruled that the patents that could be transferred to MS must be retained by Novell; thus, the 126 patents are the regulated patents, and the rest (306 patents) are the transferred patents. Fig. 1 depicts the transfer of Novell patents. Fig. 1 Download : Download high-res image (295KB)Download : Download full-size image Fig. 1. Transfer of Novell Patents. We then obtain detailed information about each patent in our data from patentview.org (serviced by USPTO). The distribution of the National Bureau of Economic Research (NBER) subcategories shows that most of the 432 patents are related to software (181 Computer Hardware & Software, 103 Electronic Business Method & Software, and 99 Information Storage). 3.4. Variables Dependent Variables: We define a follow-on innovation as a new technical idea that was built upon a previously existing innovation. Based on this definition, we operationalize the number of follow-on innovations for a patented innovation by using the number of patent citations accrued to the focal patent in a certain time window (e.g., Drivas et al., 2017; Galasso and Schankerman, 2015) (i.e., patent forward citations). In our analysis, we set the time windows for counting forward citations to the period between the beginning on the date of the DOJ's intervention and up until 4 years later (i.e., 4-year window). For hypothesis testing, we use the two separately counted forward citation variables by the citation origin: citations from the competitors of the patent-consolidating firms (PostCiteOIN) and citations from the patent-consolidating firms (PostCiteCPTN). The first dependent variable, PostCiteOIN, is defined as the number of forward citations originated from the patents belonging to the members of OIN (i.e., Sony, NEC, IBM, Red Hat, and Philips), excluding Novell. Given that the OIN members were the competitors of the patent-consolidating firms in software market, this variable is a proxy for the number of follow-on innovations created by the competitors of the patent-consolidating firms (i.e., CPTN members) after the DOJ intervention. The second dependent variable is PostCiteCPTN, which accounts for the number of forward citations originated from the CPTN members’ patents following the DOJ intervention. This variable is a proxy for the number of follow-on innovations created by the firms that were trying to consolidate the Novell patents. Independent Variable: The independent variable Regulated is a binary variable that takes the value of 1 for the regulated patents and 0 for the transferred patents. The regulated patents comprise the treatment group, and the transferred patents belong to the control group.10 Control Variables: To rule out probable confounding effects in estimating the impact of the DOJ intervention, we introduce several control variables into our regression analysis. The regulation of the patent transfer by DOJ was “targeted” to the Novell patents that were planned to be acquired by MS. Thus, we select the variables that are likely to simultaneously correlate with the MS’ selection of Novell patents for consolidation and the number of follow-on innovations of the patent. First, the number of created follow-on innovations for a patent after the DOJ intervention may be highly dependent upon the degree to which the patent has become the basis for the subsequent patented innovation before the intervention. Meanwhile, the DOJ decision might have considered the technological importance of the patent of interest for software development in general. To rule out this confounding effect, we control for the number of created follow-innovations for each Novell's patent based on the number of forward citations that the patent of interest received from 4 years before the DOJ intervention to the date of the DOJ intervention. We count the number of forward citations up to 6 months before the intervention date because the full list of the CPTN member companies was disclosed in December 2010. PreCiteOIN takes the forward citation counts that originated from the CPTN member companies during the pre-intervention period. This variable is introduced as a control variable in regressing PostCiteOIN. Likewise, when regressing the PostCiteCPTN, we control for PreCiteCPTN that takes the patent forward citation counts originated from the CPTN member companies before the DOJ intervention. Second, we control for the patent's legal scope by using the number of independent patent claims (nClaim). The broader its legal scope, the greater the probability that the patent limits the legal scope of subsequent patents (Marco et al., 2019) and that the patent is involved in patent infringement litigation (Lanjouw and Schankerman, 1997). Patents with a broad legal scope could be useful in strategic patent enforcement. Thus, MS might be interested in acquiring these patents, but their transfer could catch the attention of the DOJ. Controlling for nClaim allows us to partial out this probable confounding effect. Third, as the DOJ stated, its primary concern was the probable discouragement of further development of Linux-based applications, middleware, virtualization software, and operating system as a result of the patent transfer. Thus, the transfer of patents relevant to these application areas could become the primary target of the DOJ's intervention, while these patents were targeted by MS for strategic purposes. Meanwhile, these applications could be related to emerging technological opportunities in the software market, and thus, the relevant patents could receive more patent citations than those for other applications. To partial out this spurious effect, we introduce a binary variable DoJConcern that takes the value of 1 if the patent of interest contains at least one of the following clauses in its abstract: Linux, Unix, software, middleware, open-source, operating system, and virtual machine. The search was able to identify 98 patents in the sample. Fourth, the member companies of OIN had major stakes in the GNU/Linux software market, whereas the GNU/Linux software was the primary competitor of MS products. Hence, MS might have the incentive for acquiring patents that closely relate to OIN members’ technologies for monopolistic market profit (see the “Incentive for a firm to preempt patents for monopolistic market profit” (Chang, 1995)). Simultaneously, patents relevant to the technological domain of the OIN members could have been a part of a promising technology area, thus attracting more follow-on innovations than other software patents. To rule out this explanation, we control for whether the patent of interest has a technological link with the patents owned by the OIN members by using the patent citation information. CiteOINPat takes the value of 1 if the patent of interest cites patents owned by the OIN members before the DOJ intervention, and 0 otherwise. Fifth, the genuine value of a patent is realized through a patent portfolio (Choi and Gerlach, 2017; Parchomovsky and Wagner, 2005). Firms often obtain patents to organize their patent portfolio into a well-interconnected web of IP rights. In this regard, MS probably tried acquiring Novell patents related to MS's already-owned patents. Meanwhile, the patents closely related to the patents of MS might be relevant to emerging technological opportunities in the software market, attracting more follow-on innovation than other patents. To control for this effect, we introduce CiteMSPat as a control variable, which takes the value of 1 if the patent of interest has cited any MS-owned US patents filed before the DOJ's intervention. Sixth, Novell's patent transfers were the subject of the German authorities’ investigation regarding the violation of the antitrust law. Hence, those patented innovations that were protected in Germany could have caught the attention of the German authorities, which, in turn, triggered the DOJ's intervention later. As shown by many studies, patents with protections in multiple jurisdictions often contain commercially valuable inventions (e.g., Harhoff et al., 2003; Lanjouw et al., 1998). MS may have also planned to purchase Novell's commercially valuable patents in the first place. We control for this effect by introducing EuroFam that takes the value of 1 if the Novell patents have EPO family patents. Finally, we control for the patent application year (AppYr) and technology field fixed effects (TechFE) by using the NBER subcategory (Hall et al., 2001). Table 1 summarizes the descriptions of these key variables. [TABLE OMITTED] Our hypothesis expects that the patent forward citations originated from OIN member companies will be greater for a regulated patent than a comparable transferred patent, after the DOJ intervention. 3.5. Descriptive analysis Table 2 provides the summary statistics for the key variables. A simple comparison of the mean values reveals notable differences between the regulated and transferred patents in the two forward citation variables. On average, the regulated patents received more citations both before and after the DOJ's intervention than the transferred patents. This suggests that even though the DOJ's intervention was triggered by a seemingly exogenous event, the two groups of patents are different in their technological importance, indicating the necessity of controlling for the forward citation count accrued to the patents before the DOJ's intervention. [TABLE OMITTED] [TABLE OMITTED] 4. Results 4.1. Regression results Cross-sectional data analysis. We fit our data to the econometric model employed by Galasso and Schankerman (2015). This model controls for the pre-intervention dependent variable (in our analysis, the PreCiteOIN and PreCiteCPTN). Therefore, the estimated coefficient of the independent variable captures the difference in the number of follow-on innovations for the regulated and transferred patents that had the same number of follow-on innovations before the DOJ's intervention. We used the ordinary least squares (OLS) estimator with robust standard error for regression. For the estimation, we take natural logarithms of the two dependent variables incremented by 1 as these variables have right-skewed distributions and zero as the minimum value. Table 4 presents the regression results. [TABLE OMITTED] The first column reports the regression result using ln(PostCiteOIN + 1) as the dependent variable. The regression result shows a positive and statistically significant coefficient of Regulated at the 0.05 significance level. The number of follow-on innovations originating from OIN member companies for a regulated patent has been estimated to be 15.6% greater than that for a comparable transferred patent, following the intervention. The second column presents the estimation result using ln(PostCiteCPTN + 1) as the dependent variable. The coefficient of Regulated is statistically insignificant at the 0.1 significance level, indicating no evidence of the difference between regulated and transferred patents in the number of CPTN member's follow-on innovation after the DOJ's intervention. To further check the empirical specificity of our findings, we additionally run the regression for the forward citation counts accrued to the regulated and transferred patents from those who were not the OIN nor CPTN members (ln(PostCiteOthers + 1)). Column 3 shows that the coefficient of Regulated is statistically insignificant at the 0.1 significance level—there is no evidence showing that the DOJ's intervention influenced the creation of follow-on innovation by individuals or organizations that were not involved in Novell's patent transfer deal. Our regression results are robust to the count-variable regression models (negative binomial and Poisson models) and a placebo test. Appendix A reports the robustness check. Panel DID analysis. One may raise a concern that our cross-sectional data analysis may suffer from omitted variable bias because the control variables we introduced into the regression may not be sufficient to capture all the probable confounding effects of differences in patent-level characteristics. To address this concern, we fit our data to the patent-year fixed effect panel OLS regression model by reformatting our data into the panel data. We then create the time dummy variables corresponding to each patent citation year from 4 years before to 4 years after the DOJ's intervention date. Then, the interaction terms between these time dummy variables and Regulated are created. In the panel DID analysis, we regress yearly counted patent forward citations originated from OIN and CPTN member companies, respectively. Fig. 2 presents the estimated coefficients of the interaction terms with their 95% confidence intervals. [FIGURE OMITTED] Note that the estimated coefficients of the interaction terms (TimeDummies x Regulated) for the pre-intervention period are not far from 0 for the regression on the forward citation count originated from both OIN and CPTN member companies. This indicates the parallel time trend of the forward citation counts accrued to the regulated and transferred patents pre-DOJ intervention. Meanwhile, in the post-intervention period, the coefficients of the interaction terms are positive and statistically significant at the 0.05 significance level only for the forward citation count originated from OIN. This result confirms that the OIN members developed more follow-on innovations for the regulated patents than the transferred patents after the DOJ intervention. In contrast, there is no evidence showing that the DOJ's intervention affected the follow-on innovation development by the CPTN member companies. 4.2. Synthetic control method One of the limitations in drawing causal inferences using the prior two analyses is that the estimator could be biased due to the difference between the treatment and control groups in the treatment-free time trend of the outcome variables in either pre- or post-treatment (or both) period. Our panel DID regression result showed that the assumption of the parallel time trend of outcome variables for regulated and transferred patents in the pretreatment period holds. However, this does not guarantee the parallel time trend of outcome variables in the post-treatment period if the DOJ had not regulated the patent transfer deal. We thus mitigate this econometric concern by reanalyzing our data using a synthetic control (SC) approach as a complementary method (Kreif et al., 2016). The SC approach mechanically forces the pretreatment period outcome of the treatment and control group to become virtually identical. Under the assumption that the free-treatment post-treatment outcomes of the treatment and control groups can be expressed into a linear combination of selected covariates and pretreatment outcomes, the SC method yields an unbiased estimation of the treatment effect (Abadie et al., 2010). The dataset employed in this study has multiple regulated patents (treatment units) and transferred patents (control units). Hence, we use the method for multiple-treated and control unit case as proposed by Kreif et al. (2016). Our SC analysis presented in Appendix B reaches the same conclusion as our DID analysis results. In sum, our cross-sectional data regression analysis, panel DID estimation, and the SC method found that the DOJ's regulation has positively affected the OIN members’ development of follow-on innovation for Novell's patents. We conduct supplementary empirical analyses to rule out three rival explanations of our findings in the next sections. The first supplementary test is to specify the origin of our findings. The second analysis is to examine whether our findings were stemmed from the fact that MS was excluded from the patent consolidation rather than the DOJ's intervention effect. The last analysis is to ensure that our findings are about the impact of DOJ's intervention on follow-on “innovation” rather than “patenting” activities of the OIN member companies. 4.3. Origin of the effect Our literature review explains our findings that the DOJ's regulation mitigated patent consolidation's discouragement effect on follow-on innovations (hereafter, mitigation effect). Yet, another explanation could be that the DOJ's regulation “promoted” follow-on innovation for regulated patents by OIN members (hereafter, promotion effect). We conduct additional empirical analyses to examine which explanation is more credible. If the mitigation effect worked, the number of OIN members’ follow-on innovation for the transferred patents should have been lower than that of comparable patents that were not involved in the transfer deal (hereafter, counterpart patents). In contrast, if the promotion effect worked, the number of follow-on innovations for the regulated patents created by OIN members should have been greater than that of the comparable counterpart patents. For the test, we consider the patents that were originally filed by the four CPTN members as the counterpart patents. The CPTN members were in intensive market competition in the software market with the OIN members, while participating in the consortium for acquiring Novell's patents. Hence, we argue that the patents filed by CPTN member companies are a reasonable comparison group. The forward citation counts accrued to the counterpart patents are the baseline in this analysis. To implement this empirical strategy, we choose the US patents that were filed between January 1, 1990, and April 20, 2007, by the four CPTN members. The regression results in Table 5 present that the number of OIN members’ follow-on innovations for the transferred patents is about 6.4% lower than that of the comparable counterpart patents in the post-DOJ regulation period. Meanwhile, the coefficients of Regulated are statistically insignificant at the 0.1 significance level. Our additional analysis indicates that the CPTN members’ consolidation of the Novell patents harmed the development of OIN members’ follow-on innovations; thus, the DOJ's intervention is seen to have mitigated this effect. The existence of the “promotion effect” by the regulation is not evidenced. [TABLE OMITTED] 4.4. Buyer effect or regulation effect? In the main analysis, we used the Novell patents that were transferred to Oracle, EMC, and Apple as a comparison group of the regulated patents. A downside of this empirical strategy is its incapacity to isolate the effect of the antitrust regulation from the probable confounding effect by the fact the patent acquirer was not MS. That is, the effect of regulation could be particular for patent consolidation by three firms of the CPTN, but not necessarily so if MS was allowed to acquire the Novell patents. To address this concern, we replace the comparison group with the software patents that were transferred to MS from America Online (AOL) in June 2012. In 2012, AOL announced that it sold some of its software patents to MS for patent monetization.11 AOL was also involved in developing OSS just as Novell did, and the patent transfer timing was close enough to Novell's patent transfer (i.e., 1-year difference). Hence, AOL's patents that MS could acquire (hereafter, AOL-MS patents) can be a reasonable alternative comparison group of the regulated patents. If our finding was not solely of the buyer's effect, a similar finding as that of the main regression is likely to be observed. In contrast, if the patent buyer effect was behind our findings, the number of follow-on innovations for the regulated and the AOL-MS patents are expected to be indifferent. We collect information on the US patents that were transferred from AOL to MS in June 2012,12 which were filed before June 2008 (4-year before the transfer). In the USPTO patent assignment data, we could identify 90 AOL-MS patents. Then, we conduct the same regression analysis as the main regression. Table 6 presents the regression result. In this analysis, the AOL-MS patents have become the comparison group for both regulated and transferred patents. [TABLE OMITTED] The statistical significances and signs of the coefficients of Regulated are consistent with those in the main regression result. Meanwhile, the coefficients of Transferred are statistically insignificant at the 0.1 significance level. This result indicates that our finding was not driven by the “buyer's effect,” but more of the DOJ's regulation effect. 4.5. Patent or innovation? Evidence from copyright and trademark data In our research design, we used patents as the outcome of a firm's innovation activity. The shortcoming of this operationalization is that our findings may have restrictively indicated decreased software “patenting” activities of OIN members by the partial transfer of the Novell patents to the three CPTN members. To analyze the software innovation activities more comprehensively, we conduct two complementary analyses using two alternative measurements of a firm's software innovation activities; software copyrights, and trademarks filing activities. Software Copyrights: Copyright is a nonpatent IP right that allows a limited monopoly on technical ideas on software (Graham and Mowery, 2003). Thus, examining firms’ software copyright-filing activities can measure their software innovation activities. The subject of software copyright protection is not a conceptual or mathematical algorithm, but program source code or the computer file itself, which makes copyright filing a more direct measure of firms’ software innovation activities.13 If the partial transfer of Novell patents did not affect OIN members’ overall software innovation activities, their copyright-filing intensity on new computer programs (or source code) is expected to remain, following the partial patent transfer. In contrast, if Novell's partial transfer of patents to the CPTN members has negatively affected software innovation activities by OIN members, their software copyright-filing activities should have decreased after the transfer. To operationalize this test, we collect information about copyrights filed by OIN member companies from the US copyright office's database.14 The copyright-filing activity of MS serves as the baseline in this analysis because MS was not in the OIN program and was prevented from acquiring Novell patents by the regulation. We categorize copyright as software copyright if the subject of the copyright is “computer program.” Fig. 3 displays the results. [FIGURE OMITTED] On the left side, we present the total number of software copyrights filed by the OIN members and MS, before and after the partial transfer of the Novell patents.15 The comparison shows that OIN members’ software copyright-filing activities decreased after the partial transfer of the Novell patents. On the right side, we present the change in the between-firm share of software copyrights filed by the OIN members and MS, calculated by using the total number of software copyrights filed by the top 100 software companies as the denominator.16 The OIN members’ average share of software copyrights substantially reduced after the partial transfer of the Novell patents, whereas MS's did not. Software Trademarks: Firms’ product or service innovation can be measured by their trademark-filing activities because trademark law protects products’ brand names. As such, studies use trademark-filing activities of firms to capture firms’ innovative activities (Flikkema et al., 2014; Mendonça et al., 2004; Srinivasan et al., 2008; Stoneman, 2010). If Novell's partial transfer of its patents to the CPTN members negatively affected OIN members’ software innovation activities, their software trademark-filing activities should have dropped after the transfer. We consider MS's trademark-filing activities on software as a baseline in this analysis, as we did in the copyright data analysis. We retrieve information about the trademarks that were filed by the OIN members and MS from the USPTO trademark data (Graham et al., 2013).17 We mark a trademark as a “trademark on software” if the trademark document contains the clauses of “software for” or “computer program(s) for” in its goods and service description while being categorized into international class “009″ (“Electrical and scientific apparatus”). Fig. 4 presents the total number of software trademarks (left) and between-firm share of software trademarks filed by the OIN members and MS, before and after the partial transfer of the Novell patents. The data show that the OIN members experienced decreased software trademark-filing activities after Novell's partial transfer of patents. [FIGURE OMITTED] In sum, our additional analysis using copyright and trademark data supports the conclusion that the CPTN member's consolidation of a part of Novell patents has negatively affected the OIN members’ software innovations, and, accordingly, the DOJ's partial regulation of patent transfer helped OIN members’ software innovation activities. 5. Discussion and conclusions This study examined how the antitrsut regulation of firms' patent consolidations affects the development of follow-on innovations. Based on our reconciliation of relevant prior studies, we hypothesized that in a market sector where cumulative innovation is crucial to the competition, a firm's consolidation of patents on substitute upstream technology for what it already possesses discourages the development of follow-on innovations by the patent-consolidating firm's competitors. Accordingly, regulation of such patent consolidation is expected to positively affect the development of follow-on innovations by the patent-consolidating firm's competitors. We then empirically tested the derived hypothesis using the case of the DOJ's partial regulation of Novell's software patents transfer in 2011. Our empirical analysis used patent citation, software copyright, and software trademark data. Results indicated that antitrust regulation of the patent transfer mitigated the negative impact of the patent consolidation on the follow-on innovations development of the patent-consolidating firms’ competitors. 'Does our finding imply that regulating patent consolidations is necessary for social welfare? This study does not provide a complete answer. First, the DOJ's regulations primarily aim to encourage downstream market competition. In contrast, this study focused on the impact of regulations on follow-on innovations. The overall impact of regulations on social welfare should not be dictated by our findings because even though innovation and market competition are related to social welfare, they are not the only ones that compose social welfare. A more comprehensive analysis of how regulations of patent transfer affect other dimensions of social welfare is necessary. Second, the regulation of patent consolidation can bring undesirable consequences to other dimensions of social welfare from a market competition dynamics standpoint. In particular, when failing firms try liquidating their patents, and the only buyer of the patent is the patent-consolidating firm, the authority's restriction of such patent transfer deals may impose an exit cost to the patent-selling firm. The imposed exit cost discounts the value of the patent ex-ante while limiting the patent holder's enforceability. Restricted patent enforceability could attract market entry by less-efficient firms (Gilbert and Shapiro, 1996); hence, regulation of patent transfer deals may even harm consumer welfare. Third, whether promoting follow-on innovations is even desirable from a social welfare standpoint must be considered. In some sectors, follow-on innovations often result in marginal improvements to existing innovations. The encouragement of the follow-on innovation development of existing ideas could result in the duplication of R&D in some fields; therefore, restricting patent transfers to encourage “follow-on” innovation could result in an inefficient allocation of resources for innovation (Gilbert and Newbery, 1982; Wright, 1983). Our empirical analysis was based on a case in the software sector; hence, one may question to what extent our findings are generalizable across sectors. The rationale derived from our literature review suggests that similar findings can be expected in sectors characterized by two features—(1) cumulative innovation that is crucial for firms’ market operations and (2) patent enforcement that is effective for market competition. For instance, telecommunications technology, like software, is often developed by inheriting key functions in prior generational technology, whereas many technological components therein are patentable and effectively enforceable. In contrast, in the chemical sector, individual innovation is highly distinct from existing innovation; hence, the cumulativeness in the innovation process may be less prominent than the software or telecommunication device sector. Accordingly, our findings may not hold in this sector. Whether the sectoral heterogeneity exists indeed and what factors further explain the probable sector-level heterogeneity are intriguing questions for future studies. Our cross-sectional data analysis showed that the DOJ's regulation increased follow-on innovations of OIN member companies by 15.6%. Is this impact economically significant? Although our study alone cannot answer this question, prior studies that estimated the change in patent forward citation rate induced by other types of exogenous events provide benchmarks. For instance, Galasso and Schankerman (2015) estimated a change in the patent forward citation rate after the invalidation of patents by patent opposition. Their estimation showed that, on average, the invalidation of a patent increased the rate of five-year patent forward citations by 50%. A similar study by Gaessler et al. (2017) found that the invalidation of patents increased the five-year-window patent forward citation by 23%. A 15.6% change is below these benchmarks in magnitude. However, we argue that this does not necessarily discount the economic significance of the impact of the DOJ regulation because it was an inherently different event from the patent invalidation. Moreover, our measurement of follow-on innovations was based on four year-window patent forward citation count instead of five-year-window citation count. Firms may seek monopolistic profit, in addition to the patent transfer, by consolidating patents through preemptive patenting (Gilbert and Newbery, 1982)—patenting before their market competitors obtain them while not using the patented technology nor licensing. However, how preemptive patenting may affect “innovation” and its welfare implications remains ambiguous. From the Schumpeterian viewpoint, firms’ incentive for preemptive patenting could function as the driver for firms to engage more in R&D. Meanwhile, the presence of the preemptive patenting strategy may trigger the competitors to explore the new pathway of innovation. In contrast, the preemptive patenting on marginally improved technology or with overly broad/uncertain patent scope may discourage the competitor's market operation and innovation in the short run. This could be particular in the sector where innovation is created cumulatively, as we have discussed above. This theoretical ambiguity calls for empirical studies on whether and how a firm's patents consolidation through preemptive patenting affects innovation. In the present study, we elucidated that the formation of a market monopoly can be prevented by antitrust intervention into a firm's patent consolidation while encouraging the development of follow-on innovation. Our conclusion suggests further elaboration on the modern understanding of the relationship between antitrust and patent laws is neccessary, at least when it comes to innovation. The two laws become complementary when the right to access the substituting patents on an upstream technology is distributed across innovators; when the patents are owned by a single firm, complementarity between antitrust and patent law may not work. This implication echoes the ongoing policy and scholarly discussion on how the modern antitrust law should accommodate technological innovation (Katz and Shelanski, 2005; Khan, 2016; Sidak and Teece, 2009). Thus far, the discussion concerning the necessity of accommodating the Schumpeterian view on the relationship between market competition and innovation has been largely theoretical. Moreover, how the antitrust law plays a role in promoting technological innovation remains an open question. Our study suggests that firms’ patent consolidation through patent transfer is one of the venues where antitrust law enforcement can shape market competition and technological innovation. This implication also indicates the importance of extending the scope of antitrust intervention into “patent-only” transfers in cooperation with patent policymakers to promote market competition and technological innovation. This study has several limitations that we wish future studies to address. First, our empirical analysis was based on a single case of antitrust regulation of patent transfer. Although the case was useful for identifying the causal impact of the antitrust regulation, a comprehensive conclusion and understanding need analyses on more cases. Second, we focused on examining the impact of antitrust regulation of a firm's consolidation of patents on “substitute” technology. Yet, firms may acquire external patents on technology that is “complementary” to what they own. Here, the patent transfer may result in the generation of more innovation by improving the efficiency of the innovation process. In contrast, the aggregation of patents on complementary technology may concentrate more market power in the patent-aggregating firm by enabling the birth of a dominant “platform” (e.g., Haucap and Heimeshoff, 2014; Khan, 2016; Moore and Tambini, 2018), which has become a new issue in the antitrust policy domain. How the antitrust regulation of a firm's consolidation of patents on “complementary technology” affects innovation and market competition is an interesting question worthy of future study.

PhD; LLM; Lecturer in Intellectual Property Law at Brunel Law School, Brunel University London, Uxbridge, UK; Strategic Patenting by Pharmaceutical Companies – Should Competition Law Intervene?; IIC Int Rev Ind Prop Copyr Law. 2020; 51(9): 1062–1085.

Published online 2020 Oct 28. doi: 10.1007/s40319-020-00985-0; https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7592140/

PhD; LLM; Lecturer in Intellectual Property Law at Brunel Law School, Brunel University London, Uxbridge, UK; Strategic Patenting by Pharmaceutical Companies – Should Competition Law Intervene?; IIC Int Rev Ind Prop Copyr Law. 2020; 51(9): 1062–1085.

Published online 2020 Oct 28. doi: 10.1007/s40319-020-00985-0; https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7592140/

One of the contemporary issues in international relations is that the current hegemon, the United States, has undergone a relative decline. It is argued that American hegemony that emerged aftermath the Second World War is undergoing a decline and with the rise of a potential challenger in China looming, one major issue concerning IR scholars is whether or not the relative decline of US hegemony will result in a hegemonic war. Hegemonic wars occur when a rising challenger – revisionist power – isn’t content with the current international order and wants to change it so as to become a preponderant force and dictate terms of a new world order. This article assumes that although the US is in a relative decline it is still a dominant power and the rising power is content with the current status quo so no war occurs between the dominant and the rising power. In order to support the argument that a hegemonic war does not occur, this article provides explanation using several theoretical perspectives. Structural Realism and Balance of Power To begin with, prominent neorealist Kenneth Waltz contends that the end of the Cold War has changed the structure of international politics from bipolar to unipolar with the US being the dominant power. According to Waltz, days of US being unipolar force in world politics is numbered and slowly the world is moving towards bipolarity or multipolarity because changes in the structure of international system brings about changes in state behavior. It does not matter how much self-restraint and self-control a preponderant power is in its conduct of international relations; states are always wary and fear the dominant power and thus he maintains that balancing is universal. [1] In order to explain why, he has resorted to the Balance of Power (theory). In most basic sense, international politics is a state of anarchy where there is no central government and states rely on themselves to protect their autonomy and perpetuate their survival. Balance of Power contends that states involve in a balancing act to check the powers of preponderant force so that no any single state has enough power to become a global hegemon. [2] With the relative decline of US, China and America can enter into bipolar relationship much like the US and the USSR during the Cold War. Since Waltz himself posits bipolarity as the most stable of international configurations, it can be argued that act of balancing between the US and China brings the international distribution of power into an equilibrium and averts the risk of war. Socialization of Hegemonic Power Most scholars posit that hegemons use threats and rewards to get compliance from secondary states. Contrary to popular wisdom, scholars Ikenberry and Kupchan have contended that in addition to material power, hegemons also have the power of socialization to achieve compliance from secondary states. They call this the socialization process which involves ‘altering of the belief systems’ of elites. Basically, hegemons project their vision of international order through normative principles (norms and values) and not by material incentives; elites in secondary states internalize them, and devise policies that are compatible to the hegemon’s ideal of the international order. The authors contend that the world order thus created can sustain even when hegemon undergoes a decline because the world order created is relatively inexpensive to maintain in the sense that altering of states preferences are by virtue of ideals rather than use of coercion. Thus, by virtue of socialization of hegemonic power, relative changes in hegemon’s distribution of material power (military and economy) does not put strain on the international system. So, on viewing the world from the lens of socialization, it can be argued that the expansion of US normative principles on liberal economic norm to its former allies and enemies aftermath the second world war that led to the formation of the current liberal economic world order provides an explanation as to why in spite of US’ relative decline there is continuity for America’s liberal economic order. [3] The rising challenger China can be considered to have been socialized – it has accepted US led international norms, and participates in various International Organizations. Thus, it makes less sense for China to wage war against the hegemon whose ideals it has internalized. Hegemonic Stability Theory According to this theory, a hegemon creates a stable international economic order characterized by market openness but its decline results in global instability. This hegemonic effect of open trade benefits all participants, especially, weaker states that do not have any burden of public goods. In this sense, global economic stability is born out of hegemony and provides provision of collective public goods and in doing so facilitates a stable international system. The motivation to create an economic openness lie in the interest of the hegemon – it has the largest economy and so benefits most from open markets. In addition, only hegemons have the material capability (political and military) to provide public goods and induce other states to embrace open trade. [4] By virtue of the Hegemonic Stability Theory, the hegemon is an important element in creation and maintenance of the international system. As stated earlier, open trade benefits all participants, even the rising challengers that are accommodated in the system. In contemporary world politics, China is the fastest rising power and it is also reaping the benefits of the open economic order created by the US. By participating in the globalized economy, China has earned a comparative advantage in labor-market and its economy has been growing. On top of that China is an export-based economy and thus, it has very little incentive to jeopardize this benefit by engaging with the hegemon and thereby disrupting the order. In his article, Artur Stein has argued that decline in hegemony does not bring about a complete collapse of the trade regime as long as hegemonic power is committed to economic openness. Taking these two points in consideration, it can be argued that it is not in the interest of China to challenge US hegemony. On account, likelihood of war is averted. [5] Robert Keohane and Institutionalist Approach In After Hegemony, Robert Keohane uses an institutional approach to explain inter-state cooperation. He posits that states have common interest and in order to realize it requires achieving mutually beneficial agreements which is where international regimes come in. These regimes foster cooperation by making it easier to reach mutually beneficial inter-state agreements. They help overcome the problem of lack of qualitative and asymmetrical information, through institutional embeddedness reduces transaction costs, legal costs reduce incentive to cheat thereby reducing uncertainty and building confidence among states. Since hegemonic leadership is required to create regimes in the first place, even after the erosion of hegemony, they have high stakes and play important role in fostering cooperation (US role in the IMF and WTO). Because cooperation fosters absolute gain, all participants are benefitted. [6] By this approach, states see cooperation more beneficial than conflict. Thus, it can be argued from institutionalist approach that international regimes foster cooperation thereby reducing likelihood of conflict in the event of hegemonic decline. Conclusion The article provided four distinct perspectives with regards to declining US hegemony and potential of a hegemonic war. Using these approaches the article concludes that in spite of decline in American hegemony there will not be a significant change in the current structure of the international system mainly due to power differentials between the US and its nearest challenger China. The US is undergoing a relative decline but still, it is the largest economy boasts strongest military and has highest political leverage. In sum, prospect of a hegemonic war in contemporary world politics is only a far-fetched dream.

Like many believers, proponents of hegemonic stability theory base their view on faith alone.41 There is precious little evidence to suggest that the United States is responsible for the pacific trends that have swept across the system. In fact, the world remained equally peaceful, relatively speaking, while the United States cut its forces throughout the 1990s, as well as while it doubled its military spending in the first decade of the new century.42 Complex statistical methods should not be needed to demonstrate that levels of U.S. military spending have been essentially unrelated to global stability.¶ Hegemonic stability theory’s flaws go way beyond the absence of simple correlations to support them, however. The theory’s supporters have never been able to explain adequately how precisely 5 percent of the world’s population could force peace on the other 95 percent, unless, of course, the rest of the world was simply not intent on fighting. Most states are quite free to go to war without U.S. involvement but choose not to. The United States can be counted on, especially after Iraq, to steer well clear of most civil wars and ethnic conflicts. It took years, hundreds of thousands of casualties, and the use of chemical weapons to spur even limited interest in the events in Syria, for example; surely internal violence in, say, most of Africa would be unlikely to attract serious attention of the world’s policeman, much less intervention. The continent is, nevertheless, more peaceful today than at any other time in its history, something for which U.S. hegemony cannot take credit.43 Stability exists today in many such places to which U.S. hegemony simply does not extend.¶ Overall, proponents of the stabilizing power of U.S. hegemony should keep in mind one of the most basic observations from cognitive psychology: rarely are our actions as important to others’ calculations as we perceive them to be.44 The so‐​called egocentric bias, which is essentially ubiquitous in human interaction, suggests that although it may be natural for U.S. policymakers to interpret their role as crucial in the maintenance of world peace, they are almost certainly overestimating their own importance. Washington is probably not as central to the myriad decisions in foreign capitals that help maintain international stability as it thinks it is.¶ The indispensability fallacy owes its existence to a couple of factors. First, although all people like to bask in the reflected glory of their country’s (or culture’s) unique, nonpareil stature, Americans have long been exceptional in their exceptionalism.45 The short history of the United States, which can easily be read as an almost uninterrupted and certainly unlikely story of success, has led to a (perhaps natural) belief that it is morally, culturally, and politically superior to other, lesser countries. It is no coincidence that the exceptional state would be called on by fate to maintain peace and justice in the world.¶ Americans have always combined that feeling of divine providence with a sense of mission to spread their ideals around the world and battle evil wherever it lurks. It is that sense of destiny, of being the object of history’s call, that most obviously separates the United States from other countries. Only an American president would claim that by entering World War I, “America had the infinite privilege of fulfilling her destiny and saving the world.“46¶ Although many states are motivated by humanitarian causes, no other seems to consider promoting its values to be a national duty in quite the same way that Americans do. “I believe that God wants everybody to be free,” said George W. Bush in 2004. “That’s what I believe. And that’s one part of my foreign policy.“47 When Madeleine Albright called the United States the “indispensable nation,” she was reflecting a traditional, deeply held belief of the American people.48 Exceptional nations, like exceptional people, have an obligation to assist the merely average.¶ Many of the factors that contribute to geopolitical fear — Manichaeism, religiosity, various vested interests, and neoconservatism — also help explain American exceptionalism and the indispensability fallacy. And unipolarity makes hegemonic delusions possible. With the great power of the United States comes a sense of great responsibility: to serve and protect humanity, to drive history in positive directions. More than any other single factor, the people of the United States tend to believe that they are indispensable because they are powerful, and power tends to blind states to their limitations. “Wealth shapes our international behavior and our image,” observed Derek Leebaert. “It brings with it the freedom to make wide‐​ranging choices well beyond common sense.“49 It is quite likely that the world does not need the United States to enforce peace. In fact, if virtually any of the overlapping and mutually reinforcing explanations for the current stability are correct, the trends in international security may well prove difficult to reverse. None of the contributing factors that are commonly suggested (economic development, complex interdependence, nuclear weapons, international institutions, democracy, shifting global norms on war) seem poised to disappear any time soon.50 The world will probably continue its peaceful ways for the near future, at the very least, no matter what the United States chooses to do or not do. As Robert Jervis concluded while pondering the likely effects of U.S. restraint on decisions made in foreign capitals, “It is very unlikely that pulling off the American security blanket would lead to thoughts of war.“51 The United States will remain fundamentally safe no matter what it does — in other words, despite widespread beliefs in its inherent indispensability to the contrary.