Law Professors Hope Book Will Increase Innovation, Lead to Economic Growth

Newswise — Intellectual property law has become a legal mess that many analysts say is holding back the U.S. economy, but two University of Iowa law professors hope hope their new book can clarify the law and encourage economic innovation.

"If someone thought rationally about intellectual property (IP) laws, we would not have the laws we have now," said Herbert Hovenkamp (left), one of the world's top experts on antitrust law and a professor at the University of Iowa College of Law.

He and law professor Christina Bohannan (right) have received a $350,000 grant from the Ewing and Marion Kaufmann Foundation to write a new book suggesting ways to reform and streamline a set of laws producing rights so confusing and counter-productive that they have been referred to as a "thicket."

This thicket is more than just an abstract scholarly legal issue, though. Market-based economies depend on the development of innovative new products and services, but mounting evidence suggests the thicket is keeping many innovations from ever developing and reaching the market in the first place.

"A lot of people are held back in creating an innovative new product or service because of the intellectual property and antitrust laws they have to deal with," said Hovenkamp. "The current union of intellectual property and antitrust law does not encourage the amount of innovation that competitive markets are capable of producing."

Innovation laws are intended to protect inventors or creators from having their invention or creation used by someone else at their own loss. Copyright, for instance, protects artists, writers, composers, musicians and other creators from having their creations used by another person without compensation. IP laws also include patents, which are used to protect the creators of new technology, such as software, drugs or biotech.

However, Bohannan said U.S. law goes too far in protecting the rights of a patent or copyright holder, which is how innovation is held back. For example, IP laws might make it difficult for a researcher to develop a new drug because it requires the use of an enzyme, protein or some other piece of biotechnology that's owned by another researcher.

Getting that approval, though, might have huge costs in time, money and frustration, leading the researcher to give up. The frustration is only multiplied if a researcher needs permission from more than one rights holder.

"Intellectual property laws are supposed to encourage innovation, but instead they hold it back," said Bohannan, an IP law expert. "The more rights the owners have, the more counter-productive the IP system becomes."

Rights holders could be sued for violating antitrust laws, but Hovenkamp said that the person filing the suit would have to demonstrate financial harm to win. Since no product was developed, though, he said it's impossible to demonstrate financial harm.

One solution Bohannan and Hovenkamp will suggest is to revise IP law so that it's the rights holder who must demonstrate in an infringement lawsuit that another's violation of their rights caused some kind of harm to them. If they can't demonstrate that they lost sales, lost licensing fees, or suffered some other kind of loss because of the violation, they will receive no damages in return.

"The current law is only about using what someone else owns, not about whether that use causes harm to the owner of the right," said Bohannan. "If the uses benefits others but causes no harm to the owner of the right, then the world is better off. In this context "harm" has to be defined as something that decreases the innovator's incentive to invent in the first place."

IP law is in its confused state largely because the laws have been heavily influenced by special interests -- the recording industry, for instance, has been involved in writing anti-piracy and copyright laws in ways that favor their own interests. The researchers hope their book, "Creation Without Restraint: Competition Policy in Innovation Intensive Markets," will serve as an antidote and encourage judges and Congress to hack away at the innovation law thicket to help the economy grow.

Bohannan and Hovenkamp also plan to argue that antitrust law should penalize restraints on innovation as well as anticompetitive practices, and that other doctrines such as IP misuse, the first sale doctrine, and remedies should likewise be reformed to enhance rather than inhibit innovation.

They expect to complete the book in three years and also host a colloquium with antitrust and IP legal experts from across the country.