Sunday, March 16, 2008

Complexity, IPR Rights and Innovation Ecologies: Distributive Considerations

Part 2 — Distributive Considerations

As touched on in the previous post, an important implication of the nexus between appellate patent law, commercialization-based S&T policies privileging closed IPR rights and the notion of an increasingly global innovation ecology is the manner in which newer conceptual theories and analytical frameworks such as systems theories may be used to explicate and, perhaps, stimulate true ‘breakthrough’ innovation. The term breakthrough innovation is used consciously as opposed to nominal or incremental innovation with little or no social value.

There are any number of potential theoretical applications of systems theories to the notion of an innovation ecology. The purpose of this entry is to put forward a small number of those that may have particular resonance in a health law and policy context.

Read the rest of this post . . . .While certainly theoretical in nature, the intersection of innovation policy and complexity frameworks is not an argument about either narrow IPR rights or facilitating innovation in the context of patents as ‘simply property’. As noted by Janice Stein, it is only when values are added to the debate over policies that underpin particularly fundamental social programs such as education and health care that the concept of efficiency becomes meaningful in a democratic state. This is because in the absence of values the relationship between efficiency and accountability of government is hollow. This is the nexus where the distributive nature of systems theories generally, and complex adaptive systems in particular, may have unique value.


The strength of economic arguments regarding the societal value of strong IPR rights will vary from one jurisdiction to the next, depending on contextual balancing of distributive social considerations with those privileging free market principles. Where the balance lies on the spectrum has obvious implications for public health, given its ties to human rights and the notion of a compassionate welfare state.

On the one hand, domestic patent legislation and appellate jurisprudence that diverges from that of other nations seeking to capitalize on their domestic S&T bases may harm the global patenting strategies and marketing efforts not only of multinationals engaged in local biomedical product development but also of domestic firms and inventors seeking to capitalize on publicly funded medical research globally. IPR rights carry significant weight in the medical sciences, as they determine what type of healthcare products, devices and testing procedures become available to the public, when and on what conditions they become available, how much they cost, and the reach of innovative domestic products, firms and clinical research into the global market. Movement away from strong IPR rights and regulatory oversight (including that masquerading as under-regulation) can be seen in this light to provide disincentives for strong innovation.

On the other however, is the more subtle but (potentially) more important consideration that ‘strong’ domestic standards for patentability and product regulation, such as a low standard for obviousness in patent law or a low threshold for drug approval, may paradoxically inhibit truly creative activity in a complex innovation ecology which depends on the inherent creativity of persons positioned at the ‘front lines’ of innovation- in other words those occupying the lower rungs of the organizational hierarchy yet nevertheless form the basis for emergent adaptive system behaviours.

Undue encroachment of the inventive activity of persons skilled in the art may in fact be more counterproductive than obvious at first glance. For example, as some complex adaptive systems become increasingly ordered they have the potential to move into “detail mode” where further improvements in operational efficiency become increasingly costly. This is rather like the uppermost portion of an asymptotic curve, where almost endless investments in time, energy, resources etc. are required for tiny increments in system output. This can happen either by the dominant IPR rights regime privileging less innovative forms of activity or via national S&T policies that have as their object the ‘fencing in’ or controlling of otherwise open and creative innovative activity as part of prevailing economic models of science-based domestic productivity.

The ironic result of this scenario is that innovation might be stifled by the very policies meant to stimulate it. As argued in the paper, it is becoming increasingly plausible that this state of affairs governs commercialization and innovation in certain segments of the medical sciences. Under this view, it is not merely the capital and risk-intensive nature of product development that opposes innovation, as is often claimed (though of course, this may be true to some extent), but rather a non-systems based legal-regulatory regime that allows for and indeed privileges nominal or incremental product development activities rather than true creative inventiveness.

The global reach of regulatory instruments such as TRIPS and decisions by prominent patent offices and appeal courts such as that in KSR illustrate that firms and inventors do not operate within a purely local sphere, but rather are embedded within a complex domestic network of scientific, legal, regulatory, economic and political actors enfolded within a still larger global innovation ecology. Systems theories such complex adaptive systems help to teach us that efficient adaptation to changing and inherently uncertain conditions depends on first the recognition; second the acceptance; and third learning from and adaptation to uncertainty. This involves wholesale change from most current models of innovation, particularly in ‘risk-averse’ contexts and jurisdictions.

A systems approach to innovation-based S&T policy may be particularly useful in a global economy. This is because it privileges the interrelationships among actors and institutions (technology clusters and the social institutions underpinning them) and their interdependence in maximizing system fitness e.g., enhancing productivity and prosperity through innovation in the medical sciences. Of importance from a health law and policy perspective, a systems approach to innovation in the medical sciences may be conducive to accomplishing these goals in a manner that respects many of the distributive and egalitarian considerations embedded within prevalent social institutions such as the democratic state, common law, Rule of Law and entrenched human rights.

A systems view of innovation may also have the potential (however amorphous) to render somewhat more opaque, from both a broader governance and a more applied policy perspective, the implied relationship between individual and collective interests. This arises from the express goal of complex adaptive systems to maximize system fitness rather than that of constituent modules or actors. Distributive fitness presents an opportunity to reshape the interface between science, politics and economics based on a more contemporary nuanced understanding of the complex systems-based interaction of the elements and feedback loops comprising the current commercialization regime in the life sciences.

As discussed in the context of adaptive environmental policies, a systems approach underscores the importance of balancing accommodation and cooperation with competition among system elements so as to maximize the flexibility and responsiveness of the system to changing conditions. Indeed in its leading patent jurisprudence the U.S. Supreme Court, from Hotchkiss through Graham and KSR, has maintained the position that grant of patents for non-inventive products and process inhibits rather than stimulates innovation and competition, presuming competition is relatively unencumbered. This body of jurisprudence suggests that the goals of society and those of individuals can be appropriately prioritized and balanced and that it is the role of law to do so.

A systems theory of innovation, or public health for that matter, does not detract from the critical importance of a vital market in innovative products (indeed just the opposite), provided that separation of scientific, political and economic interests in medical product development and regulation are properly bounded by, among other things, justice and the operation of law. Global and national public-private partnerships are an example of how systems thinking can offer an exponential jump in research and development resources, both at the sheer dollar level but also in terms of the scope of interconnected hubs and nodes of resources. Hub and spoke models of this nature are not new. What is new, however, is the explicit goal of maximizing the distributive fitness of the system in the context of commercialization regimes privileging strong IPR rights. By no means does a complexity-based approach to innovation argue against the per se legitimacy of IPR rights — only that they are balanced by equally strong distributive means and mechanisms.

One of the major leverage points of complex adaptive systems, and other systems-based approaches, is the acceptance of uncertainty as an inherent, unavoidable and positive force, rather than something to be restrained and constrained at all costs. This has some fairly straight forward implications for innovation, in the medical sciences or otherwise. This is because the sine qua non of innovation is invention, which is at heart a highly serendipitous process rather than one that can be quantified by narrowly circumscribed or measurable IPR rights-intensive S&T policies. This is particularly true where, as in the present instance, the conceptual models for obtaining, synthesizing and explicating new forms of knowledge are themselves new and evolving.

Dr. Ron A. Bouchard
Associate Professor
Faculties of Law and Medicine & Dentistry
Fellow, Health Law Institute
University of Alberta

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