Tuesday, 12 July 2016

Living with IP uncertainty: fatal, or just inconvenient?

Yesterday's Aistemos blogpost ("Majors, patent facts and pebbles in the Patent Pond", here) commented on an article by Bruce Berman that touched upon the issue of uncertainty within the operation of the United States patent system and the extent to which it contributed to a recent fall in the number of patents granted to major businesses. Our position was that uncertainty has always been part of the patent system and that it was therefore difficult to attribute a fresh trend in patent grants to a feature that is itself something of a constant.

This post led to an exchange of points of view on Twitter about the impact of uncertainty in the patent system, which in turn has caused us to make some further comments about uncertainty in the context of innovation and developing new products and services. In particular we invite readers to consider the following:

* Some types of uncertainty that have an impact on intellectual property-based ventures are shared between all players in the market but their resolution is made known to all of them at the same time. For example proposals for statutory reform are resolved by the publication of an enactment following a due legislative process. Likewise, authoritative judicial rulings on patent-eligibility, injunctive relief for infringement and so on have the effect of simultaneously resolving a shared uncertainty for all parties. In such a situation those who are affected may have the option of participating in the outcome, by lobbying for for a specific legislative reform or by submitting an amicus brief alone or in conjunction with other interested parties.

* Other types of uncertainty can have an equally substantial impact on all players in the sphere of innovation and new product development without being related to intellectual property at all. The availability of investment capital and the rate of interest on the repayment of loans fall within this category but, unlike the uncertainties described above, these ones cannot generally be affected at all by the parties' actions.

* A third variety of uncertainty relates to the impact of regulatory features of trade. Pharmaceutical and healthcare products may be blocked if their efficacy or safety cannot be established. Other innovations may be kept from the market by considerations relating to their environmental impact or, in the case of high tech products and systems, by rules that restrict the transfer of technology which has military or strategic significance. Competition law and antitrust considerations may also have an adverse impact on an IP owner's aspirations to secure the market advantage that its IP portfolio potentially bestows. In all these cases the uncertainty is identifiable, the rules are susceptible to interpretation and those affected by them can press for a favourable application of the relevant regulations, seek to adapt their innovations, sell their uncertainty to a buyer willing to accept the risk inherent in it, moderate their trading behavious or simply cut their losses and abandon their enterprise.

* A fourth species of uncertainty has nothing to do with the validity of intellectual property rights, their enforceability or their potential for commercial exploitation, since it relates to the willingness of the ultimate consumer to buy into it at a purchase price that makes the project viable. Some innovations have been notably successful in attracting early adapters at initially extremely high prices on account of their greatly enhanced utility or their prestige-bestowing status: think cellphones, personal computers and flat-screen monitors. But it may be far more difficult to persuade consumers to make the same investment in a more advanced lawnmower or an internet-enabled intelligent refrigerator until prices fall more closely in line with consumer expectations and preferences.

* A fifth sort of uncertainty is that which relates to the intellectual property system but is found principally at its fringes, where the validity or enforcement of a specific right is at stake. This uncertainty affects only the owner of the right and those potentially affected by it (such as licensees, competitors and infringers) rather than the IP community at large. This is because, though there may also be uncertainties relating to the interpretation of the law, the main area of uncertainty is evidential in nature since it turns on the determination of questions of fact ("will the patent be held valid against the prior art?", "does the alleged infringement fall within the scope of the registered trade mark?", "has there been a fair use of a copyright-protected work?"). Here the resolution of the uncertainty is addressed by litigation that has its own theoretically self-correcting mechanism though appeals to a higher instance.

* The sixth sort of uncertainty relates to how an IP owner's market evolves in time, space and substance. Which competitors are strengthening their IP holdings, and in which markets? Which are filing for fresh rights and which are buying into the rights already granted to others? Which may be redeploying their resources in developing competing technologies rather than competing products using the same technology? Uncertainties like this are what, it is argued here, are among the most important for any business to address -- and they are also the easiest to resolve, now that the technology and methodology of IP analytics have come of age. The answers that IP analytics provides can help steer innovation priorities, reassure investors and generally aid in forward planning.

In short, while some form of uncertainty is hard-wired into every legal system and every type of economy, some types of uncertainty are easier to address than others, and IP analytics is able to offer some assistance in this regard.

1 comment:

  1. Thanks for avoiding the usual quote about known unknowns and unknown unknowns.

    You could have mentioned the occasional seismic shifts in the way governments randomly pump cash into innovation through grants and handouts and then take it away again when they shift the tax rules.

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