I recently had the privilege of hearing Sir Robin speak at the University of Melbourne, on the topic of 'Patents – is Europe making a mess of things?' In that talk, he also touched on what he sees as the inappropriate, unnecessary and potentially damaging influence of economists over IP policy in various jurisdictions.
I have to say that I am inclined to similar views. We are seeing a corresponding rise of economists to positions of influence within the Australian IP system.
A New Job at IP AustraliaLast year, IP Australia advertised a new position of ‘Chief Economist’. According to the position description, the role of the successful candidate would be to:
- Provide empirical input to high level policy discussions on the economic impact of IP rights and optimum policy settings for the Australian economy.
- Devise and conduct or direct new economic projects aimed at improving the evidence base for IP Australia’s strategies and policy directions.
- Raise awareness of IP economics to inform wider policy debates and efforts to improve the IP system.
The Challenge of IP Rights for EconomistsIn my opinion, any kind of meaningful analysis of the economic impact of sophisticated IP rights, such as patents, requires a deep understanding of how such rights operate, how they are obtained, how (and why) they are enforced, how (and in what circumstances) they influence the decision-making of operating companies (as both rights-holders and potential infringes), the time and costs involved in securing the rights, the way in which commercial negotiations (such as over licence agreements) operate, and so on.
IP professionals deal with clients engaged in these activities every day, whereas bureaucrats and economists within government departments rarely have any direct experience of what happens ‘at the coalface’, as it were. A particular blind spot in all policy-making and analysis is the common, and usually confidential, processes of negotiation which take place after a rights-owner identifies a potential infringement and sends a letter of demand, especially in cases which do not end in public litigation. If these cases were a small minority, this might not be a problem. However, negotiated settlements are, in my experience, by far the most common outcome of any assertion of IP rights.
Evidence-Gathering in Economic StudiesAttempts to gather evidence relating to private IP assertion and settlement have generally been of dubious value. The problem here is primarily that of selection bias. Since settlement terms are generally confidential, and the confidentiality usually contractually enforced, only a limited group of participants are willing and able to provide any details to researchers. Identifying and contacting such participants is itself problematic, and involves yet another level of selection bias.
Despite such systematic problems with accuracy and reliability, efforts along these lines have lately proven highly influential, largely due to the current spotlight on the effectiveness of the patent system resulting from some high-profile litigation, and the activities of a few bad actors typically dubbed 'patent trolls'.
The most egregious recent example of this kind of notorious study is the work of Boston University researchers James Besson and Michael Meurer, entitled The Direct Costs from NPE Disputes, which famously concluded that patent trolls cost the US economy US$29 billion in 2011. Although Besson and Meurer are located within the School of Law, only career-academic Meurer has formal legal qualifications (a JD from the University of Minnesota). Besson had early-career experience in software technology and innovation, but has worked principally as an academic since around 1997.
Neither Besson nor Meurer has any experience working in private legal practice, and in both cases their highest formal qualifications, and principal research interests, have been in (you guessed it) economics.
Despite amateur criticism on this blog and on the Gametime IP blog, along with more credible criticism from David L Schwartz of the Chicago-Kent College of Law and Jay P Kesan of the University of Illinois College of Law, Besson and Meurer's deeply flawed study continues to be widely cited and used as the basis for further proposals to 'reform' patent law.
Recent examples of uncritical citation of the headline result of the Besson and Meurer study, and its impact on policy and lawmaking, include:
- Julie Samuels, staff attorney and the Mark Cuban Chair to Eliminate Stupid Patents at the Electronic Frontier Foundation, writing for Politico;
- US Representative Pete DeFazio, in introducing – and justifying – the Saving High-tech Innovators from Egregious Legal Disputes (SHIELD) Act to Congress; and
- Ed Black, writing for Forbes.
Regulatory Interference in the IP MarketMeanwhile, the Eurpoean Commission currently has open investigations of both Samsung and Motorola Mobility (now owned by Google) regarding allegations of anticompetitive conduct in relation to their use of standards-essential patents (SEPs) in litgation, while the US Department of Justice Antitrust Division is reportedly investigating Samsung. The Division's Deputy Assistant Attorney General Renata B. Hesse has also recently confirmed its general concern about the assertion of SEPs.
These concerns relate particularly to the use of patents in the mobile communications technology space. And yet, as Sir Robin Jacob has rightly pointed out, it is difficult to identify exactly what cause there is for such concerns. Certainly there is currently a relatively high level of prominent litigation being conducted among competitors such as Apple, Samsung, Motorola/Google, HTC, Nokia and others, however these companies can all well afford to use the courts if that is their chosen strategy, and there is absolutely no evidence to suggest that any of this is having any significant impact on innovation, competition, or consumer choice. To quote the Managing IP blog article with which I opened this post:
As [Sir Robin] Jacob reasonably said, it’s hard to think of an industry where innovation has been more astonishing and rapid than mobile telecoms, where fierce competition between companies has led to many new, improved products and lower costs. Patents and other IP rights may be part of the reason for that.
Why Should We Listen to Economists?I would have thought that these would be difficult times for professional economists. After all, as a group these were the people who developed the theories and models, and provided the advice and policy inputs, that created the international mechanisms which led to the GFC – a monumental disaster which few of those same people saw coming, despite its being so clearly inevitable in hindsight. Some caution and scepticism as to the value of economic theorising must surely be in order?
But, apparently not. Whether or not the IP system requires more economists to investigate and influence it, that is what it is getting, as IP Offices across the world employ their own in-house economists to provide policy input. These days, if you are an IP Office without an economist – or, better yet, a whole department – you cannot possible claim ‘best practice’!
The Role of IP Australia’s Chief EconomistIP Australia has not, to date, been very forthcoming with details of its new Chief Economist role, but a bit of searching on LinkedIn provides some information.
As of November 2012, IP Australia's Chief Economist is Benjamin Mitra-Kahn. Dr Mitra-Kahn was formerly the UK Intellectual Property Office's economic advisor, where (in his own words) he covered ‘areas as diverse as the EU patent, patent funds, thickets, backlogs, as well as business performance and IP rights.’
Dr Mitra-Kahn has not one, but two PhDs: one on ‘Redefining the Economy: A history of national accounting and economics’ from City University; and the other on ‘Development and Empirical modelling: CGE models and gender inequality’ from New School University. He has lectured at City University, primarily on national accounting, growth, development, history of thought and financial institutions.
His main area of interest in relation to IP appears to be copyright.
Dr Mitra-Kahn’s LinkedIn profile says of his new role as Chief Economist at IP Australia that he is ‘building a team to provide evidence-based policy advice on Intellectual Property.’ The phrase ‘evidence-based’ has become something of a mantra, yet (again quoting the Managing IP blog article), Sir Robin Jacob has noted that governments then:
… press ahead with policies on the basis of little or no evidence anyway. Regrettably, that’s true. As we look around the world at political debates over issues such as the EU unitary patent, the Shield Act in the US, FRAND, compulsory licensing, copyright reform and enforcement – many of which are already before senior lawmakers – feelings run high and are often based on rhetoric more than evidence.
Of course, if the alleged 'evidence' is as dubious as that employed in Besson and Meurer's study, it would be just as well if policy-makers ignored it altogether!
As for the team-building aspect of Dr Mitra-Kahn's role, it appears that IP Australia already has a Deputy Chief Economist, in Christine McDaniel. Ms McDaniel's public LinkedIn profile page is less revealing about her role, however she lists her past roles as being at the Australian Productivity Commission, the US International Trade Commission, and Georgetown University. She was educated at the University of Colorado at Boulder.
IP Australia's Organisational Chart [PDF] places the Office of the Chief Economist within its Business Development and Strategy Group.
Other Economists in the RanksIP Australia is not the only IP-related government entity which has taken on economists. The current constitution of the Advisory Council on Intellectual Property (ACIP) now comprises two economists (out of nine members): the Chair, health economist Professor Jim Butler; and Professor Beth Webster, economist and Director of the Intellectual Property Research Institute of Australia (IPRIA).
Whether there are now enough economists influencing Australia's IP policy directions, or if there are more to come, remains to be seen.
I would be interested in other views on the role of economists within national and international IP organisations. Please feel free to share your opinions and/or experiences in the comments below.