Prizes spur market competition and prevent single supplier dependence
Charles Duan, 2020 – Adjunct Professor, Assistant Professor (starting fall 2023) and senior policy fellow with the Program on Information Justice and Intellectual Property, American University Washington College of Law; Postdoctoral Fellow, Cornell Tech; member of the Patent Public Advisory Committee, U.S. Patent and Trademark Office. “OF MONOPOLIES AND MONOCULTURES: THE INTERSECTION OF PATENTS AND NATIONAL SECURITY” 36 Santa Clara High Tech. L.J. 369, Nexis Uni, Accessed via University of Michigan //DH
Patents are not the only incentive for innovation: Government policy may also encourage innovation through a variety of means, including prizes for inventions, research grants, and tax subsidies. 195Each has its advantages and drawbacks: Patents offer theoretically market-based rewards but create perverse incentives due to monopoly rights; prizes and grants avoid anticompetitive opportunities but present moral hazard and valuation difficulties. 196
Despite the many tradeoffs among different forms of innovation incentives, much of the literature and most policymakers have tended to gravitate toward patents as the default tool of innovation policy. 197
The national security dimension of innovation in view of technological races, however, may suggest a need to alter that calculus. As seen above, patents can force a nation into dependence on a single supplier of critical technology, whether it be torpedoes, airplanes, or anthrax treatments. 198 Prizes or grants that allow for immediate free-market competition on any resulting inventions may have the benefit of protecting the government and the public from that single-supplier dependence. As a result, policymakers may seek to [*402] divert innovators in security-sensitive technology fields away from patents by offering alternative rewards.
One difficulty is that because patent law generally applies uniformly to all types of technologies, 199 it may be difficult to leverage patent law itself to discourage patenting of those technologies that are of particular relevance to national security. Nevertheless, the government may leverage a variety of approaches, such as open licensing requirements in grant agreements or prize awards, or creation of patent pools with predefined licensing commitments, to limit the likelihood that exclusive rights arise in technology areas of concern to national security.