Enabling Technology, Social Returns to Innovation, and Antitrust: The Tragedy Of Depressed Royalties

By David J. Teece – 

Innovation is the handmaiden of competition and economic growth. Few activities have larger payoffs than investment in activities which support innovation, especially R&D. However, inventors and private firms often struggle to capture an adequate return because of spillovers which benefit other firms and consumers. Social returns are at minimum three times private returns (enabling technologies likely have greater multiples). Absent government support, significant underinvestment in R&D to support enabling technologies is likely because of the difficulties associated with finding business models that enable inventors to profit from innovation. Mobile wireless technologies supporting 3G, 4G and 5G have large spillovers. Sound technology policy should support generous royalties. These considerations are ignored in the antitrust debate around patent hold up and hold out, for standards essential patents. That debate is framed on static terms. Dynamic forward looking policy considerations should be center stage.

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