Friday, July 27, 2007

IP Culture - a Political Priority?

by Peter Ackerman
CEO and President
Innovation Asset Group, Inc.

I am frequently asked to post to our blog. I’ve liked the excuse that my reflective nature requires more time. My blog blockage is cured with this. Nothing to do with political predilections. President Bush was asked about whether over-the-air broadcasters should pay performance royalties. Turned out to be esoteric from his perspective (“I have like no earthly idea what you’re talking about”). The question was asked by Al McCree, president of Altissimo! Recordings. Just an interesting subsurface alignment between the two that McCree is in the business of recording, licensing and distributing military music. His company licenses music from all of the U.S. Armed Services and their label is found in military academies, on military bases and in war memorials across the United States. It appears that, following a tour in Vietnam in which he earned the Distinguished Flying Cross, he was a constituent of Governor Bush in Texas for a time. Not that one would have expected the president to know that.

But that’s not my point. The point I want to make is that I might have preferred a response that even generically referred to the critical need to maintain a national entrepreneurial culture. I would have preferred that a question containing the key words “royalties” and “music exports” triggered the mind into gear about the competitiveness of U.S. innovation and protected creative expression. It’s what savvy political leaders do. This has nothing to do with McCree’s specific issue. And it has nothing to do with political ideology. I asked a Democratic candidate for an Oregon U.S. Senate seat about his thoughts regarding capital availability for emerging U.S. technology companies. His answer was that he felt it was a “state” issue, one for the governor to be concerned about. Great. Oregon to an extent seems to get that
as I’m sure other states do. But really it’s a national issue.

It’s simply a matter of priorities and re-jiggering the A-list of mentally-parked talking points. Strikes me that so much falls out of the subject of intellectual asset formation. This is still probably the best country for giving birth to an idea and navigating it to a point of commercialization. And ultimately, an environment that nurtures good ideas is an environment capable of liberating itself from myriad ills and dependencies. But there is much more to be done, as highlighted in a piece last year in
U.S. News & World Report.

Sure, I self-servingly want intellectual property issues to be on the front of everyone’s mind. But more broadly, I just want the economic reality and possibilities of a fully supported knowledge economy to be tightly packed in the minds of our political leaders. We’re getting there.
eBay and Alan Greenspan among others woke a few people up. But what you read and hear about the most - piracy and patent reform - are symptoms. There’s a lot to think about on the front end of the entrepreneurial value chain. Another post for another day.

It was just a question of the president by someone whose interests would be served by a good answer. Sometimes larger thoughts can be triggered by small things.

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Blogger David Kline said...

You make an excellent point about the need for our leaders to spend time thinking about how to maintain our entrepreneurial culture. Indeed, the lack of attention to this issue today stands in sharp contrast to the rather considerable thought and effort our nation's founders devoted to exactly this issue.

For example, although most people don't realize it, the American patent system was as unique in the world -- and as revolutionary -- as the Constitution itself.

The leaders of the young United States rejected the Old World view that genius was the exclusive preserve of privileged elites. Their democratic instincts told them that genius could, if given the chance, be the province of everyman. And they knew that any nation that could unleash the ingenuity of millions of its citizens (as opposed to only a few) would inevitably lead the world in economic advancement.

So the Founders very deliberately set out to construct a patent system that would stimulate the inventive genius of the common man. Unlike the British patent system, which charged exorbitant application fees equal to 10 times the annual per capita income of its average citizen, U.S. patent fees were reduced to a level that even ordinary workers and farmers could afford. Administrative procedures were also simplified. And through a host of other means as well -- including allowing anyone applying for a patent by mail to do so postage free -- the patent system encouraged innovation on a mass scale.

The results were immediate and dramatic -- as Thomas Jefferson put it, the new American patent system "has given a spring to invention beyond my conception."

Only 13 years after the first patent law was enacted by Congress, the United States had already surpassed Britain -- until then the acknowledged leader in the industrial revolution -- in the number of new inventions patented. By the 1860s, the number of new inventions patented in the U.S. was an astonishing seven times the number in Britain.

One very important reason for this dramatic surge in American innovation, of course, was the fact that by design the American patent system encouraged a much broader range of creative individuals to take part in inventive activity than was the case in Britain or other Old World countries. Whereas most British inventors were of privileged status, the vast majority of America's new inventors came from humble beginnings -- farmers, factory workers, carpenters and other artisans for the most part.

According to the economists Kenneth L. Sokoloff and B. Zorina Khan, who studied patent records and biographical data from the period, nearly 70 percent of the 160 "great inventors" of the 19th century had only a primary or secondary school education. Half had little or no formal schooling at all. And many of the most famous names in American invention -- men such as Matthias Baldwin (the locomotive), George Eastman (roll film), Elias Howe (the sewing machine), and Thomas Edison (the electric light and the phonograph) -- had to quit school at an early age to help support their families.

But the American patent system did not simply encourage the masses to participate in inventive activity. It made it economically feasible for them to do so. Indeed, by granting secure property rights to inventions for a limited time, the patent system enabled innovators to make a full-time career of innovation through the licensing of their discoveries. This in turn created the world's first national market for technology innovation, which was critical to powering America's emerging industrial economy to a position of world dominance by the end of the 19th century.

As Abraham Lincoln (himself a patentee) noted, the brilliance of the U.S. patent system was that it "added the fuel of interest to the fire of genius."

It wasn't until the end of the 19th century that most European nations amended their patent laws to match the innovation-enhancing character of the American system. It was this hundred-year lead in democratizing our patent system, more than any supposed special ingenuity of the American people, that made the United States the "arsenal of democracy" in the 20th century and the economic powerhouse that we are today.

The Founders in their wisdom gave us a unique engine of discovery and prosperity. We need leaders today who will ensure that this engine is maintained in good working order.

July 28, 2007 at 11:36 AM  
Anonymous Anonymous said...

I agree with Peter that innovation is a national issue equal in my mind to national security. With over 70% of corporate value attributed to intellectual property and intangible assets our national economy is driven not by fixed assets but innovation. Encouragement of more innovation can only serve the entire nation well. In Israel, companies can obtain governmental grants for research and development. The grants are repaid with a 3% royalty on revenues for five years. Such repayments are then used to provide additional grants to more companies to encourage more innovation.

I remember many years ago in the US, companies could earn tax credits for capital investment and I think there was a short period of time when research tax credits were provided. This is good but not as good as provided direct cash investments to encourage innovation.

We would be better served if our government worried more about encouraging innovation and less time watching interest rates.

August 4, 2007 at 3:02 PM  
Anonymous Anonymous said...

A great question, and an esteemed pair of commentators, lead me to add my response: Absolutely!

Innovation can and should be an overarching consideration in national policy. It is woefully lacking currently. One need look only to the hodge podge of ill-conceived regulations and management decisions at the USPTO to conclude that the federal government should do better to integrate its approach. Add the industry-dominated debate on patent reform, without much voice for the public interest, and there's not much of a center around which knowledgeable people can rally. A few more points.

1. Lincoln made his oft-cited quote about the patent system, referred to by David Kline, in the context of a speach he gave on innovation in 1857-58, a time when he and others were preoccupied with slavery. Lincoln saw innovation (and intellectual property) as a force that can emancipate the mind, and deserving of his attention at a most trying time.

2. Intellectual property is the invisible infrastructure of innovation. If the system is built right, with a healthy balance between exclusivity and access, great things can be accomplished. If the system is out of balance, the infrastructure crumbles, as with bridges.

3. These ideas are developed in my upcoming book, "Driving Innovation: Intellectual Property Strategies for a Dynamic World" (Cambridge University Press, 2008)

4. Canada just published an integrated national policy on science and technology. The US needs one, too.

5. This issue should be important in the presidential contest. Hillary Clinton has published her Innovation Policy 1.0 at There's not much there about intellectual property yet. But hopefully this will be a beginning for a national discussion, dealing with science, health, communication, education, immigration, energy, and international trade in an integrated and productive mix.

September 2, 2007 at 2:20 PM  
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