Question

1. What is a 'technology dead end’? Why are technology dead ends important for economic growth? Illustrate with an example. Hint: Easterly (2002) talks about all this in ch. 9.
2. In your opinion, does intellectual property (i.e. temporary ownership of ideas) incentivize the creation of more new ideas or does it lower the rate of subsequent innovation and creative expression? Explain briefly how or why. Gilbert (2011) may help you think about this.

Answer 1

Dead Ends

Sometimes something comes along that looks like it is a portent of things to come, but then turns out to be a technological dead end. For example, in the 1990s, it seemed that you couldn't go to the mailbox or rent a video without getting an AOL CD offering a free trial. They were even in some cereal boxes. It was the era of the 56Kb dialup modem, and AOL's walled garden was king as everyone went online. Their "you've got mail" sound became a standard on TV and a movie was even made with that title. It was brilliant marketing. Instead of paying for TV ads, they sent out literally over a billion CDs over the years. The CDs (actually floppy disks in the beginning) gave you a free trial ("500 hours free") and then you became a paying customer. In a matter of years, AOL became a $150B company, signing up new users every five or six seconds.

As Steve Case, AOL's CEO put it:

When we went public in 1992, we had less than 200,000 subscribers. A decade later the number was in the 25 million range.

The CDs didn't connect you to the internet, since there was no internet at the beginning. It connected you to AOL's walled garden. When the internet came along, AOL provided ways for you to connect to it, but there was a feeling that you were venturing out into alien territory beyond the curated safety of AOL's services. When broadband came along too, with Internet Service Providers (ISPs), other companies stepped up to provide places to go.

Innovation and Intellectual Property

Innovation means doing something new that improves a product, process or service. Many innovations can be protected through intellectual property (IP) rights.

inventions and patents

Inventions are the bedrock of innovation. An invention is a new solution to a technical problem and can be protected through patents. Patents protect the interests of inventors whose technologies are truly groundbreaking and commercially successful, by ensuring that an inventor can control the commercial use of their invention.

An individual or company that holds a patent has the right to prevent others from making, selling, retailing, or importing that technology. This creates opportunities for inventors to sell, trade or license their patented technologies with others who may want to use them.

The criteria that need to be satisfied to obtain a patent are set out in national IP laws and may differ from one country to another. But generally, to obtain a patent an inventor needs to demonstrate that their technology is new (novel), useful and not obvious to someone working in the related field. To do this, they are required to describe how their technology works and what it can do.

A patent can last up to 20 years, but the patent holder usually has to pay certain fees periodically throughout that 20-year period for the patent to remain valid. In practice, this means that if a technology has limited commercial value, the patent holder may decide to abandon the patent, at which point the technology falls into the public domain and may be freely used.

Patent information

In addition to recognizing and rewarding inventors for their commercially successful technologies, patents also tell the world about inventions. In order to gain patent protection for their invention, the inventor must provide a detailed explanation of how it works. In fact, every time a patent is granted, the amount of technological information that is freely available to the general public expands.

WIPO is making this and other IP-related information freely available to the public through its global databases. The largest of these – it is also one of the largest in the world – is PATENTSCOPE. It contains over 50 million patent applications that can be searched free of charge. The aim in making this information widely available is to spark new ideas and promote more innovation, and also to help narrow the knowledge gap which exists in developing and least developed countries.

Other intellectual property rights

Other IP rights can also be used to protect a new technology, product or service. For example:

Copyright protects artistic expressions like music, films, plays, photos, artwork, works of architecture and other creative works. The term “creative works” is defined very broadly for copyright purposes, such that copyright may be used to protect functional texts such as user guides and product packaging as well as works of art.

Design rights protect the shape and form of a product, i.e., what it looks like (whereas the functionality of a product – how it works – is protected by a patent). Companies invest a great deal of time and money in coming up with new and attractive designs that seduce consumers into buying their products. Design is now widely recognized as a key determinant of commercial success.

Trademarks are signs that are capable of distinguishing the goods or services of one enterprise from those of others. Trademarks are indispensable tools in today’s business world. They help companies expand their market share and they help consumers identify the products they want to buy in a crowded market place.

Trade secrets can be used to protect the “know-how” of a business. Essentially, laws relating to trade secrets mean that some people (e.g., a company’s employees) may have a legal duty to keep certain information confidential.

An invention can be protected as a trade secret or through a patent. Many businesses use trade secrets to protect their know-how, but there are downsides in doing this. From the company’s point of view it may be risky because once information is disclosed legitimately (e.g., if someone else works out how an invention works), it will no longer be protected. And from a public interest viewpoint, trade secrets are less beneficial than patents because they do not involve any sharing of technical information.