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LawThe appropriate scope of intellectual property protection has long been a subject of debate among legal scholars. This section traces the legal literature on research tools in biotechnology from its emergence in response to dramatic changes in the US intellectual property system in 1980s to its recent incorporation into an emerging legal literature on the nature and role of the "intellectual commons" (and the "public domain"). Finally, we note the emergence of another substrand of that wider legal literature that analyses the Free and Open Source software revolution of the 1980s and 1990s and attempts to generalise the analysis to a concept of "commons-based peer production". Intellectual property and the biotechnology revolution
Legal literature on the free and open source software revolution Intellectual property and the biotechnology revolutionOver the past quarter century, the distinction between academic research and commercial enterprise in the life sciences has become increasingly blurred. The expanding scope of intellectual property protection for biological inventions has been both a cause and an effect of this change. From the beginning, scientists and others expressed concern about the impact of commercialisation on the progress of scientific research. The most fundamental concern was that private ownership would impede scientists' access to the techniques, materials and information generated by other scientists. Such access was -- and as we have seen in our overview of recent theorising in both sociology of science and economics, is -- thought to be crucial to scientific progress because of the cumulative and cooperative nature of scientific research. Because of the central role of intellectual property law in the commercialisation process, and because the legal protection of intellectual property has long been justified on the ground that it promotes scientific progress and industrial innovation, intellectual property lawyers have been drawn into the debate about the impact of commercialisation on scientific research. At first, lawyers questioned whether the law should protect property rights in biological inventions at all. Over time, the focus narrowed to subtler questions about the exact scope of protection. In recent years the debate has centred around research tools in biotechnology. The concept of "research tools" is very broad, but in the context of this debate their key characteristic is that they are valuable both in themselves as end products in the marketplace and as inputs for further research and development. Thus, the question of what intellectual property protection should be accorded to research tools encapsulates the tension at the heart of intellectual property law: these laws are intended to act as an incentive to research and development by giving owners the ability to control the use of their intellectual property, yet in the long run, research and development depends on the ability of future inventors to build on existing inventions. The question for intellectual property lawyers is how to strike an appropriate balance between incentive to invent and dissemination of inventions. Economic research which deals explicitly with the optimal design of intellectual property rights in contexts where innovation is cumulative suggests that the design of intellectual property laws must take into account the ease or difficulty with which IP rights are traded after they have been granted by the state. In particular, granting strong property rights to initial innovators may be appropriate if later inventors can easily negotiate access to the initial innovations in order to build on them. However, if post-grant transactions are blocked in some way, granting strong initial property rights may stifle follow-on research. There is ample evidence that in the case of research tools in biotechnology, there may be significant costs associated with post-grant transactions. Because initial property grants have been numerous and broad, follow-on research may indeed be stifled. Heller and Eisenberg describe this outcome as the "tragedy of the anticommons". One response to anticommons tragedy is to reform intellectual property laws so that there is less need for bargaining among rights holders in order to assemble practical privileges of use. One practical difficulty with this option is that law reform comes up against enormous resistance from those with vested interests in strong intellectual property rights. Another difficulty is that it is hard to tell exactly what reforms would be effective given that property rights do not necessarily stay with those to whom they are first granted. Therefore, some observers have suggested that the formation of collective rights organisations should be encouraged in order to lower the costs of transactions. Such organisations can be effective, but there are two problems with this option. The first is that collective rights organisations can be anti-competitive, and it is difficult to encourage their formation generally without running the risk of creating anti-trust problems. The second is that we don't really know how to encourage the formation of collective rights organisations because we do not yet understand enough about what factors trigger their formation. There is therefore a need to study potential tragedy of the anticommons conditions in different contexts in order to identify what circumstances lead to the formation of transaction costs lowering institutions and what circumstances lead to bargaining break down and market failure. In the field of biotechnology, some investigation has already taken place in biomedical research. The life sciences revolution: a crucial role for intellectual propertyThe first genetically engineered organisms were created in the United States in 1973 by academic scientists Herbert Boyer and Stanley Cohen. [1] Five years later, Genentech -- the company founded by Boyer and venture capitalist Robert Swanson to commercialise the new technology -- announced the synthesis of human insulin in bacterial cells. [2] This remarkable early success captured the imagination of investors, and when Genentech went public in 1980, its stock underwent the most dramatic escalation in value in Wall Street history. [3] By the end of 1981, over 80 new biotechnology firms had been established in the US; [4] two decades on, biotechnology forms the basis of a multibillion-dollar global industry. [5] Intellectual property lawyers had reason to be interested in the process of commercialisation of biotechnology research because this process was closely linked to developments in US intellectual property law and policy. The year 1980 saw two significant legal changes -- one legislative, the other the result of a landmark court decision -- which were to accelerate the rate of commercialisation through the rest of the decade. The fact that both were driven at least in part by recognition of the commercial potential of biotechnology highlights the tendency for intellectual property laws and industrial development to form a kind of positive feedback loop -- which can continue to reinforce itself even where further strengthening of intellectual property protection may be undesirable. [32] Notes [1][Cohen, November 1973 #354], [Morrow, May 1974 #356],[Chang, April 1974 #355] [2][Genentech company website, http://www.gene.com/gene/about_genentech/history/#1976, last visited 4 March 2002] [3][UC Berkeley Library, Biotech At 25: The Founders, http://bancroft.berkeley.edu/Exhibits/Biotech/25.html, last visited 4 March 2002 ] [4][page 5, [INTECH (Institute for New Technologies), 1991 #357]] [5][For an overview of the modern biotechnology industry, see generally [Ernst&Young, 2000 #335]] [32] For example, Peter Drahos has argued that the ratcheting up of intellectual property protection at a global level is part of the process of globalisation. # Diamond v ChakrabartyThe first of these two changes was heralded by the decision of the US Supreme Court in Diamond v. Chakrabarty. [33] Before 1980, the policy of the US Patent Office was to refuse applications for patents on living organisms. [34] The basis for refusal was the long-standing "products of nature" doctrine, which specified that although processes devised to extract products found in nature could be patented, the products themselves were not patentable subject matter because they were not inventions. [35] Accordingly, when Ananda Chakrabarty applied in 1972 for a patent on a living bacterium capable of consuming oil slicks, the application was refused. Chakrabarty appealed, and in 1979 the case reached the US Supreme Court. In June 1980, by a close majority, the Supreme Court held that Chakrabarty had a right to a patent on the microorganism under the existing patent law. The majority noted that the relevant distinction was not between living and inanimate things, but between products of nature and human-made inventions; patentable subject matter included "everything under the sun that is made by man", including living organisms produced using genetic technology. [36] The Supreme Court was assisted in reaching this decision by the submission of no less than ten amicus curiae briefs. All but one supported Chakrabarty; most of these came from organisations with a commercial interest in the outcome of the case, including Genentech, while two were filed on behalf of groups of academic scientists. The briefs emphasised not only the direct commercial importance of the Supreme Court's decision, but its implications for future corporate funding of academic recombinant DNA research. [37] Genentech's brief referred to the role of patents in facilitating "the interposition of small but fruitful companies", of which Genentech itself was the prime example, in industries traditionally dominated by major firms. [38] (This point is of interest in light of more recent developments in the debate over protection of intellectual property rights in biotechnology, discussed below. [39]) Through the 1980s, further decisions consolidated the policy reversal initiated by the Supreme Court in Diamond v. Chakrabarty. In 1985, the US Patent and Trademark Appeals Board awarded a patent for a type of genetically engineered corn, holding that the general availability of plant patents had not been restricted by the passage of legislation granting specific plant patent and plant variety rights protection. [40] In 1987, it confirmed that in principle, patents could be granted on nonhuman higher animals. [41] By 1988, the Patent Office's willingness to grant a patent to Harvard University on "any nonhuman mammal transgenically engineered to incorporate into its genome an oncogene tied to a specific promoter" -- exemplified by the famous, or infamous, Harvard oncomouse -- indicated that the turnaround was complete. [42] Notes[33] 447 U.S. (United States Supreme Court Reports) 303, 100 S. Ct. (Supreme Court Reporter) 2204 (1980) [34] The only exception was statutory: the Plant Patent Act 1930 allowed patenting of plants that could be reproduced asexually. See [Kevles, 1998 #187], p 66. [35] [Kevles, 1998 #187], p 65-66, citing Ex parte Latimer, 12 March 1889 (C.D., 46 O.G. 1638), US Patent Office, Decisions of the Commissioner of Patents and of the United States Courts in Patent Cases, 1889 (Washington, D. C.: US Government Printing Office, 1890), pp 123-127. [36] [Kevles, 1998 #187], p 70 #[look at Warren Burger judgment for proper citations] [37] [Kevles, 1998 #187], p 68 [38] [Kevles, 1998 #187], p 69 [39] Eisenberg research tools paper [40] Ex parte Hibberd (1985) 227, United States Patent Quarterly, 443 [41] Ex parte Allen (1987) 2, United States Patent Quarterly (2nd Series), 1425 [42] Leder et al., Transgenic Nonhuman Animals, United States Patent No. 4,736,866,12 April 1988 Bayh-Dole ActThe second significant development in US intellectual property law and policy which occurred in 1980 was the passage of the Patent and Trademark Law Amendments Act (P.L. 96-517), more commonly known as the Bayh-Dole Act. Like the decision in Diamond v. Chakrabarty, this legislation marked the reversal of a long-standing policy approach to intellectual property protection and strongly influenced the process of research commercialisation. In the US, the enormous increase in federal funding support for scientific research following World War II had been explicitly intended as a vehicle for enhancing the economy through transfer of scientific discoveries from the laboratory via industry to the marketplace. [43] By the late 1970s, policymakers recognised that despite the development of a substantial knowledge base established with federal funds at leading public and private research universities, most of this knowledge had not been successfully translated into economic development. [44] In the face of competitive pressure on US industry, and concerned about an apparent decline in American innovation, the federal administration decided that the technology transfer problem was due to its existing patent policy. [45] Up until 1980, federal funding agencies generally retained ownership of intellectual property rights arising out of funded research as a public resource; exceptions were rare and required the funding recipient to negotiate a lengthy and difficult waiver process. [46] Government policy dictated that licenses be granted nonexclusively, with the result that potential private sector licensees were discouraged by the prospect of competition from investing in and developing new products. [47] In 1980, legislators and the administration concluded that the presumption of ownership of patents arising from federally funded research should be reversed. Despite ongoing controversy, the Bayh-Dole Act was enacted into law on 12 December 1980. [48] Under the Act, universities and small businesses were permitted to elect ownership of inventions made under federal funding; exclusive licensing was also permitted, provided the licensee undertook diligent commercial development of the invention, while the government retained a royalty-free, non-exclusive licence to practise the invention for government purposes. [49] The impact of the Bayh-Dole Act was not immediate, but it was dramatic. Certainty of title to inventions, together with uniform procedures and the ability of universities to grant exclusive licenses, provided a secure footing for industry investment in university research. The Act has been identified as one of the main drivers behind the development of university-industry research collaborations in the 1980s, with most active licenses being in the area of life sciences, where most academic research was federally funded through the National Institutes of Health (NIH). [50] Thus, intellectual property lawyers in the 1980s were interested in the effects of commercialising biotechnology research because changes in intellectual property law and policy were crucial to the commercialisation process: commercialisation depended both on the expansion of patentable subject matter to include living genetically engineered organisms following Diamond v. Chakrabarty, and on the ability of universities to retain patents on federally funded life sciences inventions and to licence those patents exclusively to the private sector under the Bayh-Dole Act. Another reason why claims that commercialisation hindered the progress of science attracted the attention of intellectual property lawyers was that such claims went to the heart of instrumental arguments in favour of intellectual property protection per se. Both the developments outlined above were justified by reference to the supposed incentive function of patent law. In the case of the Bayh Dole Act, the relevant incentive was the incentive to develop an existing invention (sometimes termed the incentive to innovate). [51] Amicus curiae briefs in the Diamond v. Chakrabarty case also referred to the incentive to innovate, but in addition, the Genentech and Pharmaceutical Manufacturers' Association briefs emphasised a different kind of incentive. They argued that allowing patents on living organisms would keep genetic engineering research "out in the open" because patents compelled publication of the means and methods that led to a patentable product. In other words they argued that patents provided an incentive to disclose the results of research. [52] At first glance, this argument -- one of several traditional justifications for patent laws developed in the midst of recurring controversies over the past several centuries -- seems to contradict the reasoning behind concerns that patents and other forms of intellectual property protection would provide a disincentive to open communication among scientists.[52a] This apparent contradiction disappears on consideration of the context in which the patent incentive was expected to operate: against a background of industrial secrecy, patent protection may well promote disclosure, but what becomes of this argument if the alternative to patent protection is not secrecy, but free and open publication, as suggested by Merton's picture of the norms of science? In the context of academic research, might patent protection actually hinder scientific progress? This question -- which stands as a question of empirical fact even if one does not accept the theoretical framework developed by classical sociologists of science -- has particular poignancy in the United States, where Article 1, Section 8 of the Constitution empowers Congress to enact intellectual property legislation only as a means to "Promote the Progress of Science and useful Arts". Notes[43] [Relations, 1999 #31], page 1 [44] [Etzkowitz, 1989 #200], page 16 [45] [Relations, 1999 #31], page 1 [46] [Relations, 1999 #31], page 2 [47] [Relations, 1999 #31], page 2 [48] The Act became effective on 1 July 1981 and was amended by P.L. 98-620 on Nov 8, 1984. The finalised and consolidated provisions appear at 37 CRF Part 401 (52 FR 8552, March 18, 1987). [49] [Relations, 1999 #31], page 6. Subsequent legislative initiatives broadened the reach of the Act even further by relaxing anti-trust restrictions on joint funding of research and development, and by authorising federal laboratories to enter into cooperative research and development agreements with private firms and universities. See generally [Relations, 1996 #35]. [50] [Relations, 1999 #31] page 2 [51] [Relations, 1999 #31], page 2 [52] [Kevles, 1998 #187], page 67 [52a] In Britain, the patent system originated primarily as an economic instrument to encourage the introduction of new technologies from other countries. In the sixteenth and seventeenth centuries, controversy surrounded the Crown's abuse of the royal prerogative and its use of patents as a source of patronage and revenue. ([Ricketson, 1998 #19], page 544-547, quoting Boehm, K., The British Patent System, Vol. I: Administration, Cambridge University Press, Cambridge, 1967, pages 14-26...). The anti-patent movement re-emerged during the Industrial Revolution, and again in the 1860s, when the main focus was on the restraining effects of patents on industry and free enterprise. ([Ricketson, 1998 #19], pages 556-7, quoting Dutton, H.I., The Patent System and Inventive Activity During the Industrial Revolution 1750-1852, Manchester University Press, Manchester, 1984, pp 17-29....The ongoing tension between the ideals of free competition and legal protection of intellectual property rights is discussed below...) The movement collapsed during the Great Depression, but at the end of the twentieth century the shift towards an information-based global economy again sparked fierce debate over the value of intellectual property protection. Persistent opposition to patent laws over the years has forced proponents to develop theories justifying patent protection. Some -- what Dutton terms the "natural law thesis" and the "reward by monopoly thesis" -- have relied on notions of justice ([Ricketson, 1998 #19], pages 553-556, quoting Dutton, supra...; see also Chapter 3: "Locke, labour and the intellectual commons", in [Drahos, 1996 #171]). The theory that patents create an incentive to disclose new inventions belongs instead to a class of justifications which treat intellectual property as a means of encouraging technological progress (these instrumental justifications are discussed below...). The disclosure theory, also known as the "exchange for secrets rationale" ([Ricketson, 1998 #19], page 556, quoting Dutton, supra...), dates back to Elizabethan times, when inventors granted patents to introduce new knowledge into Britain were obliged as a condition of the grant to teach the new techniques to British tradesmen. By the early eighteenth century patentees were required to describe the nature and manner of their inventions in a specification document. In Attorney-General (Cth) v Adelaide Steamship Co [1913] AC 781 (at 793), Lord Parker described patents as a type of contract between the patentee and the public at large, with disclosure as consideration: "A monopoly being a derogation from the common right of freedom of trade could not be granted without consideration moving to the public... In the case of new inventions the consideration was found... in the disclosure made to the public of a new and useful article or process." Early questions about the effects of extending intellectual property protection to biotechnology inventionsIn 1987, intellectual property lawyer Rebecca Eisenberg published a paper titled "Proprietary Rights and the Norms of Science in Biotechnology Research", in which she conducted a detailed examination of the interaction of proprietary rights in biotechnology with traditional scientific norms. [53] Eisenberg concluded that although patent protection sat better with traditional norms than did trade secret protection, there were areas in which the incentives of patent law clashed with those of traditional norms -- specifically, in relation to the timing of knowledge dissemination and the ability of scientists to use and extend new discoveries. With respect to knowledge dissemination, Eisenberg argued that because disclosure requirements under the patent law were in some ways stricter than under traditional norms, patent laws might actually work to reinforce existing norms, at the same time countering commercial pressures in the direction of trade secrecy by granting a property right which would survive disclosure. [54] On the other hand, she noted that many scientific discoveries may become eligible for patent protection only at a much later stage in the research process than they would normally be ripe for publication (the primary traditional means of disseminating scientific knowledge). [55] Because a patent cannot be granted for an invention which has already been disclosed, this meant that the trend towards patenting might result in substantial publication delays and the consequent slowing of related research projects which might have been helped by access to published data. Eisenberg further pointed out that although patents might not prevent disclosure altogether, disclosure is only one side of the patent law bargain. In order to build on discoveries disclosed by one scientist, other scientists must be able to apply the discovery; but while publication of results in a journal article or at a conference makes those results freely available, in the patent system disclosure marks the beginning of a long period of exclusive possession. [56] Eisenberg speculated that the adverse impact of exclusivity on scientific research was likely to be greatest in relation to inventions which are primarily useful for research rather than commercial applications, and that this impact was likely to be exacerbated in circumstances where the patentee is reluctant to grant licenses to other researchers -- out of a desire to prevent competition, because use of the invention in further research may undermine the future value of the patent by facilitating inventing around the patent, or because by preserving exclusivity in subsequent research the patentee can maximise future claims to priority of discovery both for scientific recognition and patent purposes. [57] Of course, as Eisenberg went on to acknowledge, patent exclusivity is not absolute: certain uses of an invention during the patent term do not constitute infringement. [58] In her 1987 article, and again in a 1989 article entitled "Patents and the Progress of Science: Exclusive Rights and Experimental Use", Eisenberg examined the rationale and scope of the "experimental use" defence to patent infringement. [59] The appropriate scope of the defence, she argued, was a question of balance: too narrow a defence could stifle basic research, while too broad could cause industrial sponsors either to lose interest in biotechnology research or to rely on trade secrecy instead of patent protection. [60] Eisenberg concluded that the case for allowing a defendant to escape infringement liability on the grounds that use of the patented invention was for experimental purposes was strongest where the user was attempting to check the adequacy of the patent specification or the validity of the claims, or to devise alternatives to the patented invention, and weakest where the invention is essentially being used as a tool in an unrelated research effort -- in other words, where the user is effectively an ordinary consumer of the invention. [61] Notes[53] [Eisenberg, 1987 #93] [54] [Eisenberg, 1987 #93], page 206-7 [55][Eisenberg, 1987 #93], page 207 [56][Eisenberg, 1987 #93], page 217 [57][Eisenberg, 1987 #93], page 217-218 [58][Eisenberg, 1987 #93], page 219 [59][Eisenberg, 1987 #93], page 220-224; [Eisenberg, 1989 #58] [60][Eisenberg, 1987 #93], page 224 [61][Eisenberg, 1989 #58], page 1074-1078; see also [Eisenberg, 1987 #93], page 224-225 Narrowing the focus: proprietary research toolsThese early papers dealing with the impact of intellectual property protection on the progress of scientific research in biotechnology are significant because they anticipated key aspects of the present debate over the appropriate scope of intellectual property rights in that field. During the 1990s, as research scientists and their institutions became more familiar with patenting and other aspects of commercialisation, legal discussion shifted from the broad question of whether research discoveries should be protected by intellectual property laws at all to subtler questions about what sorts of research discoveries should be protected and how to preserve the benefits of intellectual property while minimising interference with scientific progress. [62] In her 1987 and 1989 articles, Eisenberg had drawn attention to possible problems associated with patenting of inventions which are primarily useful as tools for further research and to issues surrounding licensing of such inventions. As it turned out, during the 1990s perceived problems of access to proprietary research tools became the focus of heightened controversy within the academic biotechnology research community. [63] Thus, by the late 1990s, intellectual property policy in relation to proprietary research tools was of intense practical interest to researchers, as well as being of theoretical interest as an illustration of the difficulty of reconciling the rationale for intellectual property protection of research discoveries with the need for scientists to be able to build freely on those discoveries in the interests of scientific progress. Notes [62] Preface, [Council, 1997 #38] [63] Introduction, [Council, 1997 #38] High transaction costs and the "anticommons" effectOne area of practical controversy which triggered useful theoretical discussion was the NIH's 1991 decision to file a patent application on partial cDNA sequences (also known as expressed sequence tags, or ESTs). Though later withdrawn, the application sparked ongoing debate about access to DNA sequence information and other materials, information and techniques needed to enable scientists to conduct cutting-edge research. [64] In July 1995, under the auspices of the National Academy of Sciences, a Committee on Intellectual Property and Research Tools in Molecular Biology was formed to examine the impact of intellectual property protection on access to research tools in molecular biology. A workshop organised by the committee was held in February 1996, with participants from academic institutions, industry, and government funding agencies. (A summary of the workshop was published in book form in 1997. [65]) The workshop served a practical purpose by allowing representatives of groups with diverse interests to reflect together on case histories which highlighted either success or failure at reconciling the imperatives of commercialisation and open communication in biotechnology research. From a theoretical standpoint, it was also useful because it brought together legal, economic and sociological perspectives on intellectual property in research tools. As we have seen in previous sections, recent literature in economics and sociology highlights the importance of taking seriously the existence of uncertainties and obstacles (transaction costs) associated with the exchange of scientific information. For example, the main message of the economic literature on cumulative innovation is that the design of intellectual property laws must take into account the ease or difficulty with which IP rights are traded after they have been granted by the state. While the model of the innovation process which forms the basis of the cumulative innovation literature is more realistic than the single invention model used in earlier literature on the optimal design of intellectual property rights, it is still a simplification. In the real world, property rights on multiple components of a single product may be owned by a number of separate firms, so that the development and commercialisation of new products requires coordination among many different actors. [140] In a transaction cost-free world -- where everyone has perfect knowledge and there are no impediments or costs associated with negotiation -- this would pose no problem, because property rights would be transferred through private bargaining to the users who would value them the most.[141] But in reality, transaction costs are positive, and the greater the number and complexity of negotiations, the higher the transaction costs. Michael Heller describes the situation where multiple owners each have a right to exclude others from a scarce resource as a potential "tragedy of the anticommons": if owners are unable to negotiate successfully for the bundling of rights so that someone has an effective privilege of use, the resource may be underused. [142] Heller and Eisenberg point to the recent proliferation of small-scale intellectual property rights in biomedical research -- a result of judicial expansion of the subject matter for which patents may be obtained, the record rate at which the US Patent and Trade Mark Office has issued patents over the past decade, and the willingness of the Federal Circuit (since 1982 the primary judicial institution overseeing the US patent system) to uphold the validity of issued patents -- as an example of this problem.[143] When users need access to multiple patented inputs in order to create a single useful product, say Heller and Eisenberg, transaction costs can mount to the point where effective exploitation of resources is impossible. The result is that granting too many intellectual property rights upstream stifles socially valuable innovations further downstream in the course of research and product development.[144] What factors can cause difficulties in bargaining over the transfer of proprietary research tools? The following sections summarise the thoughts of a number of writers on why transaction costs for the exchange of scientific information may be high enough to trigger a "tragedy of the anticommons". The discussion is not intended as a comprehensive review of all factors identified in the literature as affecting transaction costs relating to the transfer of proprietary research tools. Rather, it is intended to alert the reader to the range and interconnectedness of factors relevant to the bargaining process. EisenbergA recent essay by Rebecca Eisenberg constitutes an attempt to identify the underlying factors responsible for bargaining breakdown in the context of biomedical research. [161] The essay contains insights arising out of Eisenberg's membership of a working group established in 1997 by Harold Varmus, director of the NIH, to gather information about barriers to obtaining and using research tools and to find ways "to ensure that the momentum of scientific research and discoveries in the biomedical fields remains strong and unencumbered". [162] Eisenberg begins by invoking the anticommons metaphor, explaining that the more people who need to agree to allow a research project to proceed, the greater the risk that transaction costs will consume the gains from the exchange. [163] Since parties will be willing to negotiate only if they believe the benefits of reaching an agreement will outweigh the costs, high transaction costs may result in parties choosing not to participate in the exchange at all, or else adopting a "take it or leave it" approach to negotiation. Eisenberg acknowledges that bargaining failures are not inevitable, citing the examples given by Merges of institutions which have developed to reduce the transaction costs of negotiating. [164] However, she argues that in the context of biomedical research at least, the problem of bargaining failure in the market for intellectual property licences is real. From the perspective of scientists, this problem is evidenced by significant delays attending the outcome of negotiations over material transfer agreements (MTAs), patent licence agreements and database access agreements. From the perspective of university technology transfer officials, it is evidenced by resource problems arising from the need to renegotiate previously routine agreements and the need to resist attempts by outside parties to impose increasingly onerous terms. Meanwhile, private firms are also frustrated, both with the growing administrative burden of conducting negotiations and with delays in research.[165] Eisenberg identifies four separate themes emerging from the views expressed by participants in the NIH working group study. The first is that transaction costs are a greater obstacle to low value exchanges than to high value exchanges, for the simple reason that transaction costs eat into the surplus to be gained from an exchange: the smaller the surplus, the greater the risk of bargaining breakdown. The problem, says Eisenberg, is that overall progress may depend heavily on the unfettered flow of low value exchanges of methods, materials and data, so that even if the value of each individual exchange foregone due to bargaining failure is low, the aggregate social value of these exchanges may be considerable.[166] Second, says Eisenberg, heterogeneities among institutions complicate the search for mutually agreeable terms of exchange. [167] Institutions involved in biomedical research include universities, hospitals, private non-profit research institutions, government agencies, small biotechnology firms and major pharmaceutical firms; these institutions have different missions, resources and constraints. [168]Although all institutions participating in the NIH study recognised that these differences might sometimes justify asymmetrical terms of exchange, each felt that the asymmetry should work in its favour. At the same time, participants felt that their counterparts in other sectors did not appreciate the difficulties they faced in complying with particular contract terms. [169] Third, there are heterogeneities within as well as among institutions. [170] For example, the interests of scientists employed by a university do not always coincide with those of the lawyers and businesspeople employed to negotiate contract terms of behalf of the institution. In general, academic scientists are mainly interested in acquiring needed research tools as quickly as possible, whereas it is the responsiblity of university technology transfer professionals to protect the university from incurring obligations which would limit funding or licensing opportunities or freedom to conduct future research. [171] Not only do these groups have different interests, they have different spheres of expertise and professional cultures which can lead to serious communication problems and sometimes to mutual hostility. Eisenberg notes that in practice, scientists often choose bypass their employers' official procedures and approach other scientists directly. She points to the emergence of a two-tiered market in research tools: in the official "proprietary" tier, technology transfer professionals engage in protracted haggling over contract terms, while in the unofficial "free exchange" tier, scientists deal with one another according to the rules of scientific etiquette relevant to the field. [172] Finally, Eisenberg highlights uncertainty and difficulties of valuation as a common cause of bargaining failure within the biomedical research community. [173]The problem of uncertainty is particularly acute in relation to research tools because their ultimate value depends on the outcome of future research, which cannot be predicted at the time of the transaction. Eisenberg suggests that uncertainty as to how much a research tool is worth brings the self-interested bias of negotiating parties into play: parties tend to overvalue their own contributions to potentially profitable future discoveries at the expense of other inputs. [174] Where multiple licences are required, this may mean that patent owners, each demanding more than the probabilistic value of its patent, will collectively demand more than the aggregate market value of their inputs, with the result that socially valuable research may not go ahead. [175]. LongOther clues to bargaining breakdown are found scattered throughout the literature. Long points out that there are many different kinds of transaction costs; she categorises them as search costs, negotiating costs and enforcement costs. [176] In the context of patent licensing, search costs -- the cost of searching for licensees by the patent holder, or for licensors by the would-be licensee -- can be substantial. For example, the prospective user of a patented research tool must begin by identifying and determining the scope of the relevant patent in order to decide what licence rights are needed. [177] To do this properly requires significant resources, and in any case cannot be conclusive because the patent situation in any given field is dynamic. If there are multiple patents in the field, the cost of deciding which ones are relevant to a particular avenue of research may itself be prohibitive.[178] The costs of negotiating a licence will be higher the more complex the licence agreement. [179] Technology licences are inherently quite complex: a typical licence includes terms relating to the extent of the grant, the permitted field of use, improvements, confidentiality, technical assistance, indemnity, due diligence and remuneration. [180] If the prospective user of a research tool must negotiate multiple licences, not only will the costs be higher because of the greater number of negotiations to be concluded, but the complexity of each negotiation will be increased because the licensee must avoid committing itself to terms in one contract which would prevent it from fulfilling the terms of another contract. Long's third category relates to the costs of enforcing the terms of a licence and protecting against infringement by non-licensees. Long points out that enforcement costs include may include substantial indirect costs: the perception of potential litigation imposes planning costs, discovery imposes opportunity costs, and news of a patent infringement suit generally causes both the patent holder's and alleged infringer's firm values to drop. [181] Where an agreement for the transfer of proprietary research tools establishes an ongoing collaborative relationship, "enforcement" costs will also include the costs of maintaining the relationship and adjusting the terms of the agreement to changing circumstances.[182] Like Eisenberg, Long identifies uncertainty -- "severe and intractable lack of knowledge by all parties to the transaction regarding the fundamental value of the resource changing hands" -- as a major contributor to increased transaction costs in exchanges involving research tools. [183] One way in which uncertainty can raise transaction costs is by forcing the parties to incorporate terms covering a wide range of possible contingencies. [184] Uncertainty may also motivate parties to try to limit their exposure to risk by introducing restrictive terms into the agreement. For example, a pharmaceutical firm which intends to licence out a research tool for scientific use may be concerned that research conducted using the tool might lead to increased competition, undermine the firm's patent position or generate data that would trigger a tightening of regulatory requirements for its products. [185] In response it may seek to impose terms requiring the licensee to assign or licence back any improvements back to the firm on an exclusive basis, requiring the licensee not to challenge the patent's validity or restricting the publication of research results produced using the tool. Other common terms include price and quantity and territorial restrictions, restrictions on sublicensing, and leveraging arrangements -- for example, terms bundling patented and non-patented products together, extending the licence to territories in which the licensor has no intellectual property rights, or obliging the licensee to pay royalties until the last rights in a composite licence expire. [186] As Eisenberg points out, conflict over restrictive provisions can be particularly difficult to resolve where prospective users of multiple research tools face similar demands from several owners. [187] MandevilleAlthough Long distinguishes true uncertainty from a simple lack of information on the part of one or both parties to a transaction, it is clear that both types of uncertainty affect transaction costs. As Mandeville has observed, in the context of technology licensing, transaction costs are essentially information costs, and the more uncodified the information the greater the transaction costs associated with its diffusion, transfer or imitation. [188] Mandeville identifies four obstacles to successful technology licensing: the problem of appropriability identified by Arrow, uncertainty as to the future value of the technology, and two others: inequality of information between contracting parties and technology transfer costs. [189] In most transactions, licensor and licensee have asymmetrical access to knowledge about the technology, and the risk of opportunism on the part of the better-informed party makes it more difficult for the parties to reach agreement. [190] As for the costs of transferring the technology from one party to the other, they may be substantial: for example, in the case of a research tool, an effective transfer may involve training the user and possibly providing ongoing advice. HilgartnerLike Mandeville's discussion of obstacles to technology licensing, Hilgartner's work on the sociology of scientific exchange emphasises the fact that the characteristics of a particular research tool will affect transaction costs associated with its transfer. [191] As noted earlier, Hilgartner points out that decisions about access to research tools (included in his broad definition of "data") entail different strategic and practical considerations depending on the form of the research tool, its degree of novelty or scarcity, the parties' perceptions of its reliability and the purposes for which it may be used. [191a] Hilgartner's approach undermines the notion of research tools as discrete, well-defined entities, treating them instead as elements of a continuous data stream. [192] For the purposes of an exchange agreement, the data stream must be divided into transferable portions; though convention provides some guidance as to how these portions should be bounded, there are actually many possibilities, and therefore room for negotiation -- and negotiation breakdown. [193] Hilgartner's "data stream" model thus highlights a further challenge to be overcome in negotiations for the transfer of research tools: the problem of uncertainty may arise not just in relation to the value of the resource changing hands, but also the nature of the resource. Hilgartner's observations about the complexity of networks in which research tools are produced and exchanged are also relevant to the issue of transaction costs. [194] His assertion that access decisions are negotiated within research networks rather than made by individuals, and that audiences and markets for data do not necessarily consist of individuals or undifferentiated groups, resonates with Eisenberg's analysis of the heterogeneity to be found within and among institutions involved in biomedical research. [195] Hilgartner also notes that rhetoric based on collective definitions of appropriate conduct can be important in shaping the outcome of negotiations. [196] In many cases shared norms may contribute to efficiency; certainly, Eisenberg takes the view that transaction costs are generally lower when like negotiates with like. [197] MaurerOn the other hand, whether the fact of shared cultural norms is likely to lower or to raise transaction costs depends on the norms in question. For example, Stephen Maurer attributes the failure of a recent (1999-2001) attempt by a group of academic biologists to establish an international mutations database to the fact that academic culture has no analogue to the norms that facilitate transactions in private enterprise. [198] Maurer refers specifically to the habit of deal-making, procedural norms such as meeting deadlines, sticking to decisions once made, settling disagreements by popular vote and limiting discussion to realistic proposals, knowing how to price things, willingness to think about business plans and commit time and energy to negotiations, and willingness to call on personal contacts in order to strengthen an agreement.[199] Labelling the failure a tragedy of the anticommons, Maurer suggests this example demonstrates the inability of the scientific community to conduct coherent negotiations.[200] It might be fairer to say that norms which are adaptive in one set of circumstances (such as the habit of constructing reasons why a particular project deserves funding at the expense of thinking about how the project can be marketed as a product) may be maladaptive when circumstances change, as they undoubtedly have in academic biology with the spread of commercialisation. Campbell et al.Campbell et al provide a further insight into the relationship between academic cultural norms and bargaining breakdown. In a 1996-97 survey of US medical school faculty, they set out to examine how frequently academic scientists are denied access to other investigators' research results and which individuals are most likely to have this experience. [201] They found that 12.5% of medical school researchers had been denied access to other academic investigators' data during the previous three years. All else being equal, researchers were more likely to be denied access if they were young, primarily engaged in research, much published, actively commercialising their research, or were leaders in their field. In addition, those who had denied research results to others were more likely to have their own requests refused. Although interactions among academic scientists represent only one layer of the overall market for research tools, these underlying patterns may significantly influence transaction costs. [202] While Campbell et al's results do not reveal the reasoning behind refusals to provide access, one interpretation is that professional jealousy increases the chances of bargaining breakdown research tool transactions. Of course, emotions play a role in every negotiation, but it may be that the various forms of uncertainty associated with research tool transactions leave more room for fear, hope and other emotions to influence the process than would otherwise be the case. Indeed, Heller and Eisenberg suggest that scientists may be more susceptible than people from other professional backgrounds to certain types of cognitive bias which they argue contribute to bargaining breakdown. [203] Campbell et al's finding that those who had denied research results to others were more likely to have their requests refused reinforces Hilgartner's point that each person involved in a transaction is a socially situated reasoner, linked to many other people and organisations, and that access practices are intimately involved in the construction and maintenance of research networks. [204] If this is true, each negotiation is not an isolated incident, but helps to shape the parties' ongoing relationship and their relationships with others in the network. To put this another way, a bad reputation earned in the course of one negotiation may adversely affect a party's success in later negotiations. The other side of the coin is that parties involved in an ongoing relationship may be more highly motivated to reach agreement in any given round of negotiations, both for the sake of maintaining the relationship and because concessions made in one round of negotiations may be recovered in the next. [205] Finally, transaction costs are affected by many external factors. The parties may be constrained by intellectual property and competition (anti-trust) laws, characteristics of the relevant market or research area (for example, how fast moving or competitive it is), biosafety regulations and import-export regulations. [206] In addition, bargaining behaviour may be influenced by attempts to promote free access to research tools on the part of funding agencies, publishers of scientific journals or other institutions. For example, Hilgartner gives several examples of policies designed to avoid access problems in genome research, ranging from informal admonishment to imposing formal rules on grantees; [207] McCain and Eisenberg both point to journal policies designed to promote free exchange among scientists; [208] and Maurer urges government and charitable agencies to exercise their "enormous potential influence" to act as catalysts for co-operation among researchers. [209] [General theories of negotiation][NB intended addition to this chapter (yet to be written up properly - plan is to use information from technology licensing texts to show what issues would be involved with licensing a research tool at each of the stages of negotiation outlined below).]Phases and cycles in a typical negotiation (Note to myself: This material is copied from H/literature review written bits/structure of a negotiation.rtf -- draw in material from licensing texts, Hilgartner etc) Many theorists have analysed the negotiation process as a series of phases, but because negotiation theory draws on literature from a range of disciplines, different authors use different concepts and terminology. Steve Hoadley presents a helpful synthesis of several authors' analyses of the structure of a typical negotiation. (Hoadley, Steve. 1996. The 1995 NPT Conference: An Application of Zartman's Multilateral Negotiation Theory. Canberra: Australian National University Peace Research Centre.) The first phase of negotiation is recognition by each prospective party to a negotiation that the status quo is unsatisfactory, that another party has the capacity to improve the situation and that negotiation is a feasible way to persuade the other party to act. In the context of scientific research, a scientist might realise that he or she requires a particular research tool owned by another researcher and that the owner might be persuaded to agree to its use. If only one party decides that negotiation is the best way to proceed and other prospective parties disagree, the negotiation will not go ahead (although the parties may negotiate about whether to negotiate). Hoadley terms this first phase "diagnosis". (Page 1) The second phase of negotiation is "pre-negotiation", in which the parties enter into discussions to identify and define their problem, clarify options, set parameters, establish boundaries, choose participants, and draft an agenda in anticipation of negotiation. Parties use this phase to assess each other' s likely demands and offers and their own constituents' willingness to accept the outcomes of various possible agreements. (Page 2) In the context of scientific research, a prospective user of a proprietary research tool may enter into "pre-negotiation" with a number of possible providers. The scientist may engage in this and the first phase simultaneously, exploring ways of inventing around or otherwise doing without the research tool while comparing different options for obtaining the tool. At this stage the scientist may weigh the relative merits of going through official or unofficial (informal) channels. (Ref:Eisenberg's "formal" and "informal" tiers of exchange). The third phase moves the negotiation from the agenda or broad "formulae" established in the second phase to a detailed agreement. This phase involves all the elements normally associated with formal negotiation: strategies, tactics, bargaining, concession making, convergence, and formal agreement. "Strategies" include avoidance, yielding, contending and problem solving. "Tactics" include modes of bargaining such as management of demands, offers, concessions and linkages by means of warnings, threats, bluffs and displays of good faith. The agreement reached may be mutually satisfactory, or it may work to the advantage of one party but not the other. (Page 2) In the context of bargaining over the transfer of a research tool... (integrate material from licensing texts). Hoadley terms the third phase "negotiation". The fourth phase of negotiation is "legitimation", also referred to in the international relations context as "ratification". In all but the most simple negotiations, the negotiators do not represent only themselves. Negotiators are thus often engaged in a "two-level game" in which they must not only persuade each other to accept any agreement, but must then "sell" the deal to their constituents. Concepts noted by Hoadley as being relevant to the legitimation phase include tied hands, cutting slack, elite collusion, linkages, inter-constituency alliances and side payments to purchase acquiescence. (Pp 2-3) In the context of scientific research, one scientist may negotiate on behalf of a whole research team, or a university technology transfer official may negotiate on behalf of academic staff. Eisenberg has noted the possibility of diverging interests between negotiators and constituents in this context. (Ref: my earlier text) The fifth phase of negotiation identified by Hoadley from his survey of the scholarly literature is "implementation". In the context of international relations, implementation involves the routinisation and stabilisation of an agreement in a framework of statutes, policies, administrative guidelines, and official and public expectations. In the context of scientific research, implementation may involve the signing of a contract such as a licence agreement or materials transfer agreement. (Page 3) (Check licensing texts for any better ideas). The sixth and final phase, "feedback", is closely linked to implementation in that it involves monitoring and assessment of the outcomes of the negotiation and diagnosis of the new status quo, which may lead to further cycle of negotiation. (Ref: Hilgartner talks about maintaining collaborations.) The analyses surveyed by Hoadley acknowledge that in practice, a crisis may occur at any point in a negotiation which results in the negotiation being turned back to an earlier phase, after which new ways to avoid a repetition of the crisis will be explored. In other words, although the six phases just outlined suggests a linear process, the process of negotiation is in fact cyclical. (Page 3-4) Having described these six phases of negotiation, Hoadley explains that although this model is soundly based in empirical observations, it is flawed in that it is ultimately derived from a bilateral bargaining model. Bargaining, says Hoadley, may be conceived most simply as an exchange of offers and concessions by two parties on a monotonic continuum: in other words, it is unidimensional value distribution. Two-party negotiation is not simply value distribution, but also involves value creation and the use of rhetoric, by which each party attempts to persuade the other to accept non-identical bargaining chips as being equivalent for the purposes of exchange. Multilateral negotiation is more complex still. Although this complexity tempts theorists to treat multilateral negotiation as a collection of bilateral deals, Hoadley argues that this approach cannot do justice to the unique character of the subject and that a new approach to negotiation theory is required. What is the "unique character" of multilateral negotiation? Political scientist I. William Zartman has identified six defining characteristics. (Hoadley, page 6-8) The first is that a multilateral negotiation involves three or more negotiating parties who are sufficiently autonomous to pursue their authentic and distinct interests. The second is that the parties to a multilateral negotiation can be expected to bring multiple issues to the negotiating table, if not explicitly, then as part of their negotiating "baggage". Multiple issues increase complexity, but can also provide opportunities for resolving bargaining stalemate. The same issues will be more or less important to different parties, and the importance of any given issue will also change over time, creating what Zartman calls "variable values". The third defining characteristic of a multilateral negotiation is that parties may play varying roles with respect to other parties to the negotiation. "Drivers" are leaders who pursue their own interests by organising other participants. "Conductors" (or "managers", or "brokers") facilitate the process of collective agreement with less overt devotion to their own interests. "Defenders" promote a single issue without compromise even at the expense of delaying agreement, while "breakers" obstruct collective agreement in order to maximise their freedom of movement on a few vital issues. Finally, "cruisers" are parties without strong interests who either combine with other parties as followers or remain virtual non-participants. (Hoadley, page 6, citing Zartman, page 5). The fourth of Zartman's six characteristics is the formation of coalitions, driven by the varying values and distinct roles adopted by parties to a multilateral negotiation. Coalitions can facilitate the basic devices of negotiation -- packaging, presentation, forming linkages, and effecting trade-offs -- in a complex setting. The fifth characteristic is consensus decision-making. This type of decision-making is contrasted with unanimous decision-making and majority-rule decision-making, which, it is argued, do not work well in multilateral settings. If unanimity is the goal, a single "breaker" can veto any decision. If the majority rules, a coalition of parties with similar inclination but not necessarily much intensity of commitment can override intensely felt sensitivities of a minority; such a majority decision may not be legitimised or implemented by the minority. To avoid these problems, multilateral negotiations typically adopt a decision rule in which abstention is taken as agreement. Majority-minority polarisation is avoided; compromise between "drivers" and "defenders" is accorded high priority; "cruisers" are not required to declare themselves; and "breakers" are accommodated or persuaded to seek satisfaction by other means than overt opposition. (direct quote, Hoadley p7; footnote: some people object to consensus decision-making on the basis that it is ponderous and produces agreements that are bland, vague and open to varying if not mutually contradictory interpretations by the different parties, while those who defend consensus decision-making argued that it works well in contexts where bargaining is ongoing, allowing an interactive process of clarification and refinement of the issues -- consensus decision-making works well to build community, hence its use in cohousing -- Ref: Richard Jefferson's objections) The sixth and final defining characteristic of multilateral negotiations as posited by Zartman is that in contrast to bilateral negotiations that focus on exchanges of concessions on tangible values, the goal of multilateral negotiations is typically to agree on rules that each party will, it is hoped, adopt to regulate tangible inter-party relations. In other words, rules and norms are the outcomes most amenable to multilateral negotiations. (Page 8) Zartman notes that the interplay of the first three characteristics of multilateral negotiations listed above presents a dauntingly enormous number of variables to anyone attempting to analyse the process. The result is a system of organised complexity which cannot be reduced to a simple model. The appropriate response to this complexity, argues Zartman, is not simplification, but management. According to Zartman, the key to management lies in the second three characteristics of multilateral negotiations, each of which is effectively a way of managing diverse participants in complex interactions. Coalitions reduce the number of significant players; consensus decision-making accommodates varied values and roles; and rule-making leaves distribution of tangibles to the parties. In addition, Zartman argues that procedural aspects of a negotiation must be acknowledged by analysts as essential aids in the management of complexity. Despite his assertion that complexity in multilateral negotiations is irreducible, Zartman observes that in practice it is often possible to interpret the roles assumed by parties as reactions to initiatives by "drivers": these roles, he says, "take on their meaning in relation to the leadership function as it is played, resisted, followed, exploited, circumvented [or] ignored". (Hoadley p 10, citing Zartman, page221.) Commenting on this observation, Hoadley suggests that one way to structure the analysis of a multilateral negotiation is to treat the leadership role as the "independent variable" of the process. (Hoadely p10) In a case study of the 1995 Non-Proliferation Treaty Conference, the world's largest multilateral arms-control negotiation, Hoadley attempts to bring together insights from the phase-and-cycle model of negotiation outlined above and I. William Zartman's multilateral negotiation theory. Rather than abandoning the phase-and-cycle model, Hoadley supplements it to account for the multilateral context. (This approach is consistent with Zartman's response to the multiplicity of theoretical perspectives -- decision theory, game theory, organisation theory, small group theory, coalition theory and leadership theory -- represented in his 1994 compilation of essays on international multilateral negotiation: Zartman neither chooses among the theories nor tries to synthesise them, asserting instead that each approach is authentic and useful in its own terms.(Hoadley p6) ) By employing a composite paradigm, Hoadley is able to structure his analysis clearly while taking a useful first step towards the development of a distinct multilateral negotiation paradigm. (Hoadley p5) The present study will adopt Hoadley's approach, while acknowledging the need for further theoretical work in this area. Notes[64] Introduction, [Council, 1997 #38] [65] [Council, 1997 #38] [66] See [Galanter, 1997 #88], [Dau-Schmidt, 1997 #89], and generally "Symposium: Law and Society & Law and Economics: Common Ground, Irreconcilable Differences, New Directions", 1997 Wisconsin Law Review. [67] A number of papers describe the history this development: [Merges, 1996 #57], [McAdams, 1997 #91], [Ellickson, 1998 #92], [Rai, 1999 #53]. In the late 1980s, the emergence of a new subdiscipline of rational choice sociology created a point of contact between sociologists and rational choice scholars in other disciplines including philosophy, economics and political science. At the time, economists were grappling with the problem of explaining how self-interest could be overcome in the formation and operation of collective institutions. Classical economic theory did not cast much light on this problem, but because of the new interdisciplinary connection, economists found themselves able to draw on a substantial body of sociological research on norms. This "new institutional economics" was picked up in turn by law and economics scholars who recognised the following deficiencies in traditional economic analyses of law ([Ellickson, 1998 #92], page 539-540). First, like the neoclassical economic model, "classical" law and economics ignores socialisation (internalised norms), treating individuals' preferences as exogenous; but legal policies are often designed with the purpose of inculcating people with certain values -- or in other words, shaping their preferences ([Dau-Schmidt, 1997 #89], page 414) . Similarly, classical law and economics tends to underrate the importance of informal systems of social control (externally enforced norms) relative to formal systems (the law); but in reality, norms may often be more important than law, especially in contexts where the stakes of a given interaction are low relative to the parties' desire to maintain a continuing relationship. Finally, classical law and economics theory implicitly gives greater weight to the pursuit of material rewards than to the pursuit of social status, even though conventional economics supposes that an individual can obtain utility from any sort of experience, and in many cases the pursuit of social status may be a more important motivation. (Note that if, as some sociologists of science suppose, powerful socialisation, dependence on membership of a professional community and the pursuit of social status over material rewards are key features of the normative structure of academic science, these deficiencies of classical law and economics theory are perhaps especially relevant in the analysis of interactions within the scientific community.) By the mid-1990s, the legal academy was seeing an explosion in law and norms scholarship, evidenced by a number of special symposia on the topic (in 1995 the American Law and Economics Association had a panel devoted to the economic analysis of norms; in 1996 the Pennsylvania Law Review published a symposium on "Law, Economics and Norms" (144 University of Pennsylvania Law Review (1996)); in 1997 the Wisconsin Law Review followed with its symposium on "Law and Society & Law and Economics: Common Ground, Irreconcilable Differences, New Directions" (1997 Wisconsin Law Review), and in 1998 the University of Chicago Law School co-sponsored a conference entitled "Social Norms, Social Meaning, and the Economic Analysis of Law" (27 Journal of Legal Studies (1998)). Robert C. Ellickson, author of a landmark case study dealing with the settlement of property disputes by Californian ranchers using informal, norms-based rules (Of Coase and Cattle: Dispute Resolution Among Neighbours in Shasta County, 38 Stanford Law Review 623 (1986)), identifies eight different "clusters" of active law and norms scholars ([Ellickson, 1998 #92], page 546-549). These include "law and society" theorists, sociologists (among them Donald Black and James Coleman, a leading proponent of rational choice sociology in the 1980s), game theorists (originating within the discipline of philosophy, game theory now transcends disciplinary boundaries), a number of individuals -- including himself, Robert Cooter, Lisa Bernstein, Richard McAdams and Eric Posner -- and the "New Chicago School", including Lawrence Lessig, Cass Sunstein and Kenneth Dau-Schmidt. (Within law and economics, norms are now a central concern of contracts scholars who pursue Stewart Macaulay's early finding that norms often determine business behaviour more than law - [McAdams, 1997 #91], page 632-633, citing a number of articles at note 41 and 42 -- this may be of relevance to my analysis of negotiations for MTAs...) The ultimate aim of members of this last group, says Ellickson, is the intentional manipulation of norms by the state to achieve desired social goals; but he points out that this aim is not necessarily shared by other law and norms scholars ([Ellickson, 1998 #92], page 549). Besides this point of difference, law and norms scholars disagree on a number of other important issues: terminology, including the definition of "norms"; whether norms generally promote social welfare; and the relative importance of law, external norms and internalised norms to the establishment of co-operation ([Ellickson, 1998 #92], page 549-551; [McAdams, 1997 #91], page 634-636). Nevertheless, all focus on the relationship between the legal system and informal systems of social control. [68] See [Merges, 1996 #57] and [Rai, 1999 #53] (also [Rai, 2001 #54] and [Kieff, 2001 #55]), discussed below at footnote X.... See also [Merges, 2000 #253], discussed below at.... [69] [Nelson, 1997 #48] provides a summary of these theories. [70] Eisenberg's 1989 article, discussed above ([Eisenberg, 1989 #58]), presents cases for and against exclusive property rights in scientific research, supported by arguments drawn from economics and sociology of science respectively . [71] [Laudan, 1982 #216], page 254-257 [72] [Nowotny, 1996 #178], page xix-xx: the biggest single influence from the philosophy of science was [Kuhn, 1970 #364]. See also generally [Laudan, 1982 #216], and footnote [30] above. [73][Hilgartner, 1997 #49]; [Hilgartner, 1994 #160] [74] [Hilgartner, 1994 #160], page 358 [75][Hilgartner, 1994 #160], page 359 [76][Hilgartner, 1994 #160], page 359-360 [77][Hilgartner, 1994 #160], page 360 [78][Hilgartner, 1994 #160], page 360-361. Jordan and Lynch ([Jordan, 1998 #142]) describe how the polymerase chain reaction (PCR) technique has been adapted to different circumstances in science, medicine, industry and criminal forensics. Their paper explores in detail the evolution of the information status of a molecular biological technique from unreliable to standardised. [79][Hilgartner, 1994 #160], page 361 [80][Hilgartner, 1994 #160], page 358; page 362-363 [81][Hilgartner, 1994 #160], page 363 [82][Hilgartner, 1994 #160], page 363 [83][Hilgartner, 1994 #160], page 358; page 363-366 [84][Hilgartner, 1994 #160], page 363 [85][Hilgartner, 1994 #160], page 364-365 [86][Hilgartner, 1994 #160], page 358 [87] [Hilgartner, 1994 #160], page 358; page 366-368; [Hilgartner, 1997 #49], page 7-8; [Hilgartner, 1998 #183], page 202 [88] Transferred material is bailed property. [89] [Hilgartner, 1994 #160], page 366-367 [89a] [Hilgartner, 1994 #160], page 367 [90] [Hilgartner, 1994 #160], page 367-368 [91] [Hilgartner, 1997 #49], page 7. Or do intellectual property laws actually assist members of the research community to negotiate what is, irrespective of the existence of intellectual property rights, an inherently complex set of relationships? See below, reference to the information function of intellectual property rights (Arrow/Mandeville...), and to Powell's empirical work demonstrating the complexity of modern research networks in biotechnology ([Powell, 2001 #298]). [92] [Hilgartner, 1997 #49], page 7. [93] [Hilgartner, 1997 #49], page 7, refers to the work of Cambrosio, Mackenzie and Keating on the interaction of scientific and legal innovations in the commercialisation of monoclonal antibodies ([Mackenzie, 1990 #180]; see also [Cambrosio, 1998 #192]), to his own empirical work (see [Hilgartner, 1998 #183], [Hilgartner, 1995 #161]), and to the controversy which led to the formation of the Committee on Intellectual Property and Research Tools in Molecular Biology and to attempts to develop a Uniform Biological Materials Transfer Agreement (for more detail, see [Enserink, 1999 #130] and [Relations, 1996 #35]). Hilgartner also refers to [Blumenthal, 1992 #132], one of a series of survey studies investigating the effects of academic-industry relationships in the life sciences. Over the decade from 1984 to 1994, the results of these surveys were remarkably stable, indicating that academic researchers in the life sciences who were involved in research relationships with industry tended to be more secretive about their results than academics without industry support, and that a substantial number were influenced by commercial considerations in the choice of research projects ([Blumenthal, 1986 #102, Blumenthal, 1992 #132, Blumenthal, 1996 #144, Blumenthal, 1996 #145]). Two more recent studies in this series specifically investigated the prevalence and determinants of data withholding behaviours among academic life scientists. A 1994 -1995 national survey of life sciences academics in top United States research universities found that participation in academic-industry research relationships and engagement in the commercialisation of university research was significantly associated with delays in publication and refusal to share research results. Nearly one-fifth of respondents reported delays of over six months in publication of research results (... NIH considers more than 60 days unreasonable) in order to allow for patent applications or negotiations, to slow the dissemination of undesired results, to protect scientific priority or to resolve disputes over the ownership of intellectual property. ([Blumenthal, 1997 #143]). A 1996-1997 survey of US medical school academic staff found that 12.5% of medical school researchers had been denied access to other academics' data during the previous three years, and that those who were most likely to be denied access were those who had withheld research results from others, published more than 20 articles in the last three years, applied for a patent, or spent more than 40 hours per week in research activities. ([Campbell, 2000 #134]) The results of this second survey suggest that researchers who are perceived as being particularly successful or productive either commercially or academically may have difficulty maintaining sharing networks, perhaps because others are jealous or suspicious of highly successful colleagues. The fact that researchers who had previously withheld research results from others were frequent victims of data withholding is not surprising, but it does highlight the fact that exchanges of data among scientists are not usually one-off events; in bargaining terms, it may be as important in any given negotiation to preserve the relationships between the parties as to achieve a particular outcome. [94] [Hilgartner, 1997 #49], page 8. Hilgartner's own empirical work has been conducted in the highly competitive field of genome research; he notes that in less competitive fields where goals are not so focused and other restrictions on data access are less prevalent, intellectual property considerations might be thought likely to produce greater reductions in openness. [95][Hilgartner, 1994 #160], page 369. Cambrosio and Keating ([Cambrosio, 1998 #192]) give examples in which the private ownership of monoclonal antibodies became the key to public circulation. They argue (at page 176) that the issue of access pertains less to ownership in itself, or to the distinction between public and private sectors of the national economy, than to the construction of an infrastructure that allows specific techniques or tools to be transferred from local to extended networks. Private companies may be part of such an infrastructure. [96][Eisenberg, 1987 #93], page 229-231 [97] [Hilgartner, 1998 #183] describes policies adopted by funders of genome research to manage tensions surrounding data access. [98][Hilgartner, 1998 #183], page 205 and 208-210. [99][Hilgartner, 1998 #183], page 215 [100] [Merges, 1996 #57] and [Rai, 1999 #53] Merges and Rai both share the aim of the "New Chicago School" of law and norms scholarship (footnote 67), i.e. that of identifying ways in which the state could use law to strengthen desirable norms or weaken undesirable norms, in this case within the scientific research community. Merges begins by acknowledging concerns over the impact of commercialisation, and in particular intellectual property rights, on the conduct of public scientific research. He points out that in terms of property rights theory, scientists have traditionally treated the public sphere more like a limited-access commons than a truly open public domain. He then argues that just as scientists asserted various informal property rights in relation to scientific information even before commercialisation (see [Hagstrom, 1965 #366]), current scientific practices effectively "water down" formal intellectual property rights (at least in dealings involving only research scientists) so as to minimise the impact of legal change. (So watering down has a damping effect...?). Merges argues that, since actual scientific practice appears always to have been influenced not only by the legal position with respect to ownership of scientific information but also by internal rules of the scientific community, it makes sense for intellectual property policymakers to "show respect" for those rules -- by which he means starting with the assumption that they help to establish desirable co-operation (in sociological terms, that they are "functional") -- and be prepared to adjust some of the rules of the formal intellectual property system to better reflect the fact that science originates as a product of cooperative effort. In particular, Merges favours formalising the experimental use defence to patent infringement and re-evaluating the patent utility requirement to ensure that inventions reach a significant degree of practical promise before a patent application is filed. Rai begins by arguing that the evolution of academic scientific research norms from the period before 1980 to the present day illustrates the tenets of law and norms theory: specifically, as the background law has changed to encourage patenting by academic researchers, norms have evolved in the same direction. However, she argues that scientific norms have not changed to the extent of endorsing the patenting of upstream research in biotechnology, and to back up this argument she points to the refusal of certain major research universities in the US to seek patents for ESTs (above...; ([Rai, 2001 #54], page 707-708, summarising [Rai, 1999 #53]) ). Rai advocates government reinforcement of these "residual" norms of academic research to create a public domain that embodies the appropriate balance between research and development in biotechnology ([Rai, 1999 #53], page 151). (Rai's primary criticism of "full-blown" patent rights in fundamental scientific research is that such rights create significant transaction costs which may hinder rather than promote development; the problem of transaction costs is discussed further in the text below. See generally [Rai, 2001 #54], replying to [Kieff, 2001 #55].) [101][Hilgartner, 1997 #49], page 6-7 [101a] Loughlan provides a modern perspective on moral justifications for intellectual property rights: "there is no widespread social and economic acceptance of a general proposition that persons ought to be legally entitled to regain the full value of their labour. What do you think capitalism is about?" ([Loughlan, 1998 #18], page 15.) [102] [Nelson, 1997 #48] The second and third of these theories were encountered earlier under the heading "...". Nelson and Mazzoleni give a brief outline of each theory as follows ([Nelson, 1997 #48], page 1): "Invention-inducement theory: The anticipation of receiving patents provides motivation for useful invention. Disclosure theory: Patents facilitate wide knowledge about and use of inventions by inducing inventors to disclose their inventions when otherwise they would rely on secrecy. Development and commercialisation theory: Patents induce the investment needed to develop and commercialise inventions. Prospect development theory: patents enable the orderly exploration of broad prospects for derivative inventions." [103] [Loughlan, 1998 #18], page 93 [103a] Methods for empirical studies have included examination of historical records of industrial development for countries with and without patent systems; qualitative research to determine the impact of patent incentives on research and development decisions in firms; and measurement of the difference between private and social rates of return to investments in research and development. ([Eisenberg, 1989 #58], pages 1031-1033.) [104] David Vaver expresses the point neatly: "[I]f the allocation of [intellectual] property rights is simply a means to an end, namely, to make the fruits of creativity and research available to users, then one must ask if the means is the most effective way to that end. If the rights restrict availability and use more than they increase it, they are unjustifiable; if the converse, one must ask if there are better means of increasing availability and use, either by modifying the rights or by finding alternative means." David Vaver, "Some Agnostic Observations on Intellectual Property" (1991) 6 Intellectual Property Journal (Canada) 125 at 126-8). [105] Also note in this connection the comments of Burger CJ delivering the judgment of the court in Diamond v Chakrabarty (1980) 447 US 303 at 317-318: "It is argued that this Court should weigh... potential hazards in considering whether respondent's invention is patentable subject matter.... We disagree. The grant or denial of patents on microorganisms is not likely to put an end to genetic research or to its attendant risks. The large amount of research that has already occurred when no researcher had sure knowledge that patent protection would be available suggests that legislative or judicial fiat as to patentability will not deter the scientific mind from probing into the unknown any more than Canute could command the tides." [In relation to other incentives, also consider the freeware debate... maybe do a big comparison chapter later on, when considering policy options?] [106] [Eisenberg, 1989 #58], page 1031, footnote 59; Industrial Property Advisory Committee, Patents, Innovation and Competition in Australia, A Report to the Minister for Science and Technology, Canberra,1984, page 15. The authors go on to observe that "[s]uch measures may be less important than the broader dimensions of national economic policy which, by affecting taxation, exchange rates, interest rates, employment, and demand, set the climate for investment in innovation." [107] Long-term secrecy is not always feasible in relation to a new invention, for example because marketing the invention as a product provides an opportunity for reverse engineering. In that case, there is no need to provide an incentive to disclose the invention -- it will be disclosed anyway. But where long term secrecy is feasible, the inventor may have little to gain from patent protection, which may not last as long as a well-kept trade secret, and which may be difficult to enforce if infringers are also able to keep their use of the invention secret. See [Eisenberg, 1989 #58], pages 1028-1029. [108] Edmund W. Kitch, "The Nature and Function of the Patent System" (1977) 20 Journal of Law and Economics 265-290 (concerning the facilitating of information transfer, see especially pages 276 and 278-9). [108a] For a comprehensive overview of the patent system before the 1960s, see generally Fritz Machlup, An Economic Review of the Patent System, Study No. 15 of the Subcomm. on Patents, Trademarks and Copyrights of the Senate Comm. on the Judiciary, 85th Cong., 2d Sess. (1958) [108b] Kenneth J. Arrow, "Economic Welfare and the Allocation of Resources to Invention", in Richard R. Nelson, ed., The Rate and Direction of Inventive Activities, Princeton University Press, Princeton, 1962. [108c] Edmund W. Kitch, "The Nature and Function of the Patent System" (1977) 20 Journal of Law and Economics 265, page 277-278. [109] [Nelson, 1997 #48], page 6; [Eisenberg, 1989 #58], page 1060. [110] [Eisenberg, 1989 #58], page 1061, citing Michael Polanyi, "The Republic of Science: Its Political and Economic Theory" (1962) 1 Minerva 54. [111] [Eisenberg, 1989 #58], page 1063-1065, citing works by Robert K. Merton and Warren O. Hagstrom. [112] According to Kitch, the patent system cannot perform a prospect function in the context of basic scientific research because it is impossible to fashion a meaningful property right around a mere discovery or explanation of scientific phenomena. However, he does believe that basic research faces the same problems of coordination among researchers as are found in applied research, and suggests that the prospect function performed by the patent system in relation to applied research may be performed in relation to basic research by peer review procedures for research grant applications (Edmund W. Kitch, "The Nature and Function of the Patent System" (1977) 20 Journal of Law and Economics 265 at pages 288-289). [113] [Mandeville, 1996 #248], page 9 [114] [Mandeville, 1996 #248], pages 57-66 [115] This model is elaborated in chapter 4, "Developing an information-theoretic perspective on innovation", [Mandeville, 1996 #248]. [115a] [Mandeville, 1996 #248], page 52-54 [116] [Mandeville, 1996 #248], page 50-51 [117] [Mandeville, 1996 #248], page 57 [118] [Mandeville, 1996 #248], chapter 5, "Information flow mechanisms in the technological change process". [119][Mandeville, 1996 #248], page 75 [120] [Mandeville, 1996 #248], page 9 [120a] [Mandeville, 1996 #248], page 93 [121] [Mandeville, 1996 #248], page 98 [122] [Mandeville, 1996 #248], page 99 [123][Mandeville, 1996 #248], page 96 [124] [Mandeville, 1996 #248], page 50-51 [125] The relevance to the biotechnology industry of Mandeville's arguments against strong patent protection is demonstrated by the work of Walter W. Powell. Writing from a sociological perspective, Powell has argued that in fields where knowledge is developing rapidly and the sources of knowledge are widely dispersed, the locus of innovation is found in interorganisational networks. In a recent article, he emphasises the importance of relational contracting among participants in the biotechnology industry: because the underlying science and technology is so diverse, not even the largest players can build a sufficiently strong research base to cover all areas of technical innovation, and similarly, it is not easy to assemble the full range of skills required to get new products to market beneath one roof. To compensate for this lack of internal capability, participants in the field have turned to joint ventures, research partnerships, strategic alliances, minority equity investments and licensing arrangements. Powell regards information flow as being so important in the field of biotechnology that he describes the biotechnology industry as not so much an industry in the traditional sense, as a "conduit" for a wide range of surrounding sectors to access fundamental new technologies. See generally [Powell, 2001 #298]. [126] [Mandeville, 1996 #248], page 103 [127] [Eisenberg, 2000 #221], pages 791-792. [127a] [Mandeville, 1996 #248], page 103; [Eisenberg, 2000 #221], page 796. [128] [Mandeville, 1996 #248], page 105. [129] This is not to say that the policy implications are always clear. Sociologists Cambrosio and Keating argue that private ownership of specific research tools may actually promote their transfer from local to extended networks within the scientific community ([Cambrosio, 1998 #192], page 176, and see footnote... above; Mandeville would describe this as part of the process of codification), while Merges ([Merges, 2001 #291]) argues that property rights can promote the formation of economic institutions, such as patent pools, which then act as channels for the informal exchange of valuable information (see below in text). [130] [Merges, 2001 #291], p125; [Merges, 2000 #253], p.... (Can't find photocopy to get page number.) Early papers include [Merges, 1990 #293] and [Scotchmer, 1991 #294]. [131] Nordhaus, W., "Invention, Growth, and Welfare: A Theoretical Treatment of Technological Change", MIT Press, Cambridge, Mass., 1969 [132] For a review of the optimal design literature, see [Gallini, 2002 #239]. (Downloaded on 13 June 2001 as a working paper dated May 6 2001 from Suzanne Scotchmer's internet homepage, http://socrates.berkeley.edu/~Scotch/ip.html. No page numbers; coversheet describes the paper as forthcoming in two publications: Innovation Policy and the Economy, vol. 2, Adam Jaffe, Joshua Lerner and Scott Stern, eds, MIT Press 2002 Legal Orderings and Economic Institutions, F. Cafaggi, A. Nicita and U. Pagano, eds., Routledge Studies in Political Economy....) [133] S. Scotchmer, Cumulative Innovation in Theory and Practice, Goldman School of Public Policy Working Paper 240, University of California (Berkeley), February 1999, p1. ( [Scotchmer, 1999 #307], downloaded on 12 December 2001 from Suzanne Scotchmer's internet homepage, http://socrates.berkeley.edu/~Scotch/ip.html.) [134] [Gallini, 2002 #239], under heading IV: Optimal Design: The Case of Cumulative Innovation". [135] See [Barton, 1997 #306], text accompanying notes 12 to 25. (No page numbers in my copy, downloaded from LexSee...) [136] [Gallini, 2002 #239], under heading "IV: Optimal Design: The Case of Cumulative Innovation". In this connection, Barton observes that early basic research is more likely than follow-on research to have been publicly funded through research grants or other schemes which may provide adequate incentives even in the absence of intellectual property protection: [Barton, 1997 #306], text accompanying note 19. [137] [Gallini, 2002 #239], under heading "IV: Optimal Design: The Case of Cumulative Innovation". [138] [Barton, 2000 #265], p1934.; [Barton, 1997 #306], text accompanying note 25. [139] [Gallini, 2002 #239], under heading "IV: Optimal Design: The Case of Cumulative Innovation". [140] [Merges, 2000 #253], p... [have misplaced photocopy of actual article] [141] [Long, 2000 #259], page 827, citing R. H. Coase, The Problem of Social Cost (1960) 3 Journal of Law and Economics, and G. Calabresi and A. D. Melamed, Property Rules, Liability Rules, and Inalienability: One View of the Cathedral, (1972) 85 Harvard Law Review 1089, 1094-95 [142] M. A. Heller, The Tragedy of the Anticommons: Property in the Transition from Marx to Markets (1998), 111 Harvard Law Review, 621 [143] [Heller, 1998 #56]; [Long, 2000 #259], p825. [144] [Heller, 1998 #56], p 698. [161] [Eisenberg, 2001 #286] [162] NIH Director's Policy Forum, "Introduction", http://www.nih.gov/about/forum/. The trigger for the establishment of the working group, as for the research tools workshop referred to earlier, was the controversy sparked by the NIH's attempt to patent ESTs. The working group reported in 1998 and Varmus asked the NIH Office of Technology Transfer to develop new guidelines based on its proposals. The draft guidelines were released in May 1999; the full policy, including guidelines and a separate statement of principles, appeared in December 1999 (see [Marshall, 1999 #131], page 2430; the final notice of the policy, entitled Sharing Biomedical Research Resources: Principles and Guidelines for Recipients of NIH Research Grants and Contracts, appeared in the Federal Register on December 23, 1999 [64 FR 72090]). The policy urged scientists who receive federal funds to avoid signing agreements that stifle academic communication, for example agreements for the transfer of biological materials which impose excessive editorial control or delays in publication; not to seek or agree to exclusive licenses on research tools; and to minimise administrative impediments related to exchange of materials by refusing unacceptable conditions, such as "reach through" provisions claiming broad rights to future discoveries made using the materials. It also urged academic institutions to be flexible in dealing with other institutions, including companies. Though generally well-received by universities and large pharmaceutical companies, the NIH policy angered small biotechnology firms, which as a class depend heavily on the sale or licensing of research tools; all groups expressed doubts about practical implementation ([Marshall, 1999 #131], page 2430). In September 2000, the NIH responded by seeking comments from members of the biomedical research and development communities on their experience in implementing and using the policy (the request for comments was published in the Federal Register on 7 September 2000 [65 FR 54293] and is available at http://ott.od.nih.gov/textonly/rtimpl.html (last visited 12 March 2002)). Minutes of a meeting of the Advisory Committee to the Director of the NIH outline the responses received. After almost a year, many researchers remained unfamiliar with the guidelines, with some comments indicating major misunderstandings and continuing suspicion of the NIH's motives. Although some streamlining of research tools sharing agreements had taken place, some negotiations, especially for agreements between universities and industry, continued to encounter difficulties. There were also problems not clearly addressed by the guidelines, for example with negotiating agreements for sharing software developed for use in biological research. The Advisory Committee concluded that continued monitoring would be required. (Proceedings of the 81st Meeting of the Advisory Committee to the Director, National Institutes of Health, December 7, 2000, http://www.nih.gov/about/director/120700min.htm (last visited 12 March 2002), pages 7-10.) (Note to myself (12.3.02): Upshot:Despite uncertainty as to whether the NIH policy on sharing has achieved any significant progress towards the goal of balancing the need for sharing of research resources with the imperative to commercialise academic research, the process of policy development did much to enhance theoretical understanding of the issues involved. Note also that the minutes contain useful discussion not included here, including noting that a recent amendment to the Bayh Dole Act, called the Stevenson-Wylder technology transfer commercialisation act of 1999, mandates that inventions by non-profit organisations and small businesses "are used in a manner to promote free competition and enterprise without unduly encumbering future research and discovery"; also notes that there was a possibility of establishing a research tools forum, suggested by Eisenberg, which I should chase up; also note the uniform biological materials transfer agreement; also note that one member of committee pointed out that the educational mission of universities is in fact still their most important method of technology transfer, despite pressure to turn technology transfer offices into profit centres...) [163] [Eisenberg, 2001 #286], page 224. [164] [Eisenberg, 2001 #286], page 224. [165] [Eisenberg, 2001 #286], page 225. [166] [Eisenberg, 2001 #286], page 234. [167] [Eisenberg, 2001 #286], page 235ff. [168] [Eisenberg, 2001 #286], page 235. See also [Relations, #34], page 1-2. [169] [Eisenberg, 2001 #286], page 235-236. See also [Heller, 1998 #56], page 700-701. [170] [Eisenberg, 2001 #286], page 239ff. [171] [Eisenberg, 2001 #286], page 240-241. [172] [Eisenberg, 2001 #286], page 242-243. McCain has studied scientific etiquette surrounding the exchange of experimental materials, instruments and methods through interviews with experimental geneticists and by analysing acknowledgement patterns in published research papers. She identifies several factors which affect the behaviour and expectations of individuals as information requesters and information providers. (See generally [McCain, 1991 #137]; note that McCain's theoretical approach is based on Hagstrom's gift-exchange model of scientific exchange rather than on constructivist theory.) [173] [Eisenberg, 2001 #286], page 243ff. [174] [Eisenberg, 2001 #286], page 243. [175] [Heller, 1998 #56], page 701. [176] [Long, 2000 #259], page 828-831. Cf Mandeville's discussion of licensing transaction costs, which is framed around Coase's categories of costs of arriving at an agreed price and costs of defining and enforcing obligations of parties to the agreement. ([Mandeville, 1996 #248], page 70-71.) [177] [Long, 2000 #259], page 828. [178] [EPTD, 2001 #270], page 22-23. [179] [Long, 2000 #259], page 828-830. [180] [McKeough, 1997 #20], page 506. [181] [Long, 2000 #259], page 830-831. [182] Hilgartner makes this point in the context of collaboration agreements between scientists ([Hilgartner, 1997 #49], page 5). [183] [Long, 2000 #259], page 833. [184] [Eisenberg, 1989 #58], page 1073. [185] [Eisenberg, 2001 #286], page 244 [186] Restrictive licence provisions have received attention in the literature on competition (anti-trust) law and are also a topic of particular concern for developing countries licensing technology in from overseas. See, for example, [Nielsen, 2001 #321], page 12-13; [Mandeville, 1996 #248], page 71-73; [Barton, 1997 #313]. [187] [Eisenberg, 2001 #286], page 230. [188] [Mandeville, 1996 #248], chapter 5. [189] [Mandeville, 1996 #248], page 69-70. [190] [Mandeville, 1996 #248], page 69. [191] [Hilgartner, 1994 #160; Hilgartner, 1997 #49; Hilgartner, 1998 #183] [191a] [Hilgartner, 1994 #160], page 359. [192] [Hilgartner, 1994 #160], page 361-362. [193] [Hilgartner, 1994 #160], page 362. [194] See, eg, [Hilgartner, 1994 #160], page 362-363. [195] [Hilgartner, 1994 #160], page 362-363. [196] [Hilgartner, 1997 #49], page 7. [197] [Eisenberg, 2001 #286], page 239. [198] [Maurer, 2001 #247], page 15. [199] [Maurer, 2001 #247], page 15. Maurer notes that two other issues that might have been expected to create obstacles did not arise, ie the community did not appear to have any ideological commitment to "open source" principles, and neither were members particularly concerned about "giving away" intellectual property. [200] [Maurer, 2001 #247], page 17. Note to myself: this article is quite a good model of the type of thing I want to do with my case studies... [201] [Campbell, 2000 #134]. [202] [Campbell, 2000 #134], page 305. [203] These cognitive biases are: overestimating the likelihood that salient but low probability events will occur (for example, that one's research tool will turn out to be the linchpin of the next blockbuster invention ([Long, 2000 #259], page 834), and systematically overvaluing one's own assets and disparaging the claims of opponents when in competition with others. See [Heller, 1998 #56], page 701. [204] [Hilgartner, 1994 #160], page 362. [205] This is the advantage of "repeat players" over "one-shotters" in litigation. [Ref?...] [206] [Division, 2001 #287], page 24. [207] See generally [Hilgartner, 1998 #183]. [208] See [McCain, 1995 #139] and [Eisenberg, 1987 #93], page 198-205, describing a controversy which erupted in the summer of 1980 over a policy of the Journal of Biological Chemistry requiring authors to make available to other researchers any biological materials referred to in published manuscripts, and the subsequent adoption by other prominent journals of similar policies. [209] [Maurer, 2001 #247], page 16; Maurer's position is thus consistent with that of Merges and other law and norms scholars who advocate deliberate intervention to promote the formation of transaction cost-lowering institutions. (Note to myself: the NIH's development of the Uniform Biological Material Transfer Agreement (UMBTA) is an example of an attempt to do this....) References: Hoadley, Steve. 1996. The 1995 NPT Conference: An Application of Zartman's Multilateral Negotiation Theory. Canberra: Australian National University Peace Research Centre. What can be done to prevent anticommons tragedy?There are two possible approaches to preventing a tragedy of the anticommons in biotechnology research and development. One approach focuses on the grant of intellectual property rights; the other focuses on post-grant transactions. Reform intellectual property lawsOne way to prevent the problem of underuse would be to redesign the rules surrounding the inital grant of property rights so as to avoid granting too many conflicting entitlements. For example, Barton argues that the notion of utility could be tightened to restrict patenting of fundamental concepts, that novelty and non-obviousness requirements should be interpreted more strictly, that the "experimental use" defence to patent infringement should be expanded and that automatic royalty-free licences, or at least compulsory licences at a reasonable royalty rate, should be issued for the use of any patented technology in research where the patent holder is not already making the technology sufficiently available. [145] Maureen O'Rourke goes further, proposing the introduction of a "fair use" defence to patent infringement similar to that available under copyright law.[146] Reduce transaction costsAnother solution would be to focus on removing impediments to successful bargaining over the transfer of proprietary rights. In fact, as the optimal design of intellectual property rights is strongly affected by the pattern of transactions in which they are exchanged after the initial grant by the state, any reforms to the rules surrounding initial grants would need to take subsequent transactions into account. For this reason, understanding post-grant transactions is necessary whether or not they are the primary focus for attempts to overcome the "anticommons" problem. [147] One author who has devoted considerable attention to understanding post-grant transactions is Robert Merges. [148] He argues that in some contexts where there are multiple owners and transaction costs are high, an anticommons tragedy may be avoided if communities of intellectual property owners develop collective institutions to lower the transaction costs of bundling multiple licences. Transaction cost-lowering institutions include copyright collectives in the music industry and patent pools in the automobile, aircraft manufacturing and synthetic rubber industries. More recently, patent pools have also emerged in the consumer electronics industry. Such institutions are the intellectual property equivalent of Ellickson's neighbourhood dispute resolution system, mentioned earlier in relation to law and norms theory [see footnote...]; consistent with Ellickson's observations, they appear to work best when they are run by a close-knit community of experts with a shared understanding of the relevant industry and technology.[149] According to Merges, these institutions are often nucleated by simple bilateral contracts between parties who expect to have repeat interactions, sometimes maturing into freestanding administrative entities responsible for wide-scale licensing of large bundles of members' intellectual property rights.[150] Merges identifies a number of different types of collective institutions, ranging from relatively simple arrangements, to huge industrywide institutions with dozens of members encompassing hundreds of patents, to "quasi-pools" in which exchanges are regularised by norms rather than by actual contracts. [151] Nevertheless, all share one key characteristic: they function by substituting a private system of transactional mechanisms for property entitlements, granted by the state, which would require individual bargains for each transaction. Merges notes that the costs of establishing a patent pool or other collective institution may be substantial, for example because of differing assessments by potential members of the technological merits of each other's contributions, because members may withhold private information about the details of the technology or the relevant patents, or because of strategic behaviour aimed at appropriating surplus revenue arising out of the creation of the pool. [152] With initial costs so steep, some historical pools to which Merges refers would probably not have come into existence without government assistance; he argues that in situations where collective institutions do not appear spontaneously, the state should consider intervening to promote their formation. [153] It is clear that Merges regards the formation of patent pools and other collective institutions in a positive light, and not only because they avert the possibility of an anticommons tragedy. Merges actually welcomes conditions which create the potential for bargaining breakdown -- strong property rights together with high transaction costs -- on the basis that it is primarily the prospect of patent-induced blockages which motivates firms to form collective institutions. Merges sees these institutions as beneficial in their own right, observing that they provide a framework for standardisation of techniques and for the institutionalised exchange of unpatented technical information -- advantages which might not be realised in the absence of strong property rights. [154] For these reasons, Merges describes himself as an optimist with respect to the likely effects of proliferating intellectual property rights.[155] There are, however, at least two reasons why encouraging the formation of transaction cost-lowering institutions may not be an ideal solution to the problems predicted by Heller and Eisenberg. (a) danger of facilitating anti-competitive behaviourThe first difficulty is that such arrangements may facilitate anti-competitive behaviour. As Barton points out, every grant of intellectual property rights is a distortion of free market principles, but the distortion is tolerated on the basis that monopoly profits provide an incentive for the creation of new products.[156] One danger with patent pools and cross-licensing agreements is that the intellectual property rights may actually decrease the incentives for future research and development within the group: an uncertain share of an oligopolistic rent is not as strong an incentive as a specific monopoly, and if future inventions are required to be added automatically to the cross-licensing pool there may be little incentive for members to invest in ongoing innovation. The incentives of non-members may also be reduced if the cross-licensing structure is used to create barriers to entry into the market or the field of research beyond what is directly authorised by the relevant intellectual property rights. [157]Of course, not every transaction cost-lowering institution poses an undue threat to competition. For example, Barton argues that there should be no objection to cross-licences aimed at enabling two firms without substantial market power and with complementary abilities to cooperate in a strategic alliance, provided licensing restraints are limited to what is necessary to maintain the firms' incentives to develop a specific product. (By contrast, he says, there may be cause for concern when the patents involved in cross-licensing are fundamental, when participants include the leading firms in an industry, and when access to the package is not relatively easy.)[158] The point is that if the combination of strong property rights and high transaction costs in a particular field were to bring about a situation in which cross-licensing or patent-pooling arrangements became commonplace, at least some of these arrangements could be expected to create competition problems which might then be very difficult to resolve. Arguably, the present state of the agricultural biotechnology industry exemplifies this problem. Among private corporations in agricultural biotechnology, an extreme form of transaction cost-lowering institution has emerged. Unable to afford the costs of obtaining and enforcing patents on their own, companies have resorted to mergers, described by Barton as "the ultimate cross-licence". [243] As a result, key intellectual property rights in agriculture are held by a small number of powerful firms, largely protected from the costs of litigation by the deterrent effect of mutually assured destruction.[244] While this outcome may constitute institution-forming success from the point of view of the major players, the effect of this market concentration has been to raise the barriers to market entry of others wishing to participate in research and development in agricultural biotechnology, because -- apart from anti-trust laws -- there is nothing to deter industry leaders from using their intellectual property portfolios against outsiders. [245] (b) incomplete understanding of the intellectual property and innovation systemsThe second problem with trying to encourage the formation of transaction cost-lowering institutions as a solution to a potential tragedy of the anticommons is that we do not yet sufficiently understand the factors that contribute to bargaining breakdown, on the one hand, and on the other to the establishment of mechanisms for successful negotiation.Some commentators, like Merges, are optimistic about the prospect of reconciling proliferating property rights with the need to integrate disparate rights into useful-sized bundles; others, like Heller and Eisenberg, are more sceptical. But as Merges explains, optimists and pessimists have so far studied different contexts. He argues that we need both more data and more nuanced theory to identify what distinguishes anticommons tragedy from institution-forming success. [159] Clarisa Long agrees, remarking that if bargaining over socially beneficial transfers of proprietary rights sometimes fails, it would be useful to figure out why such failures occur. [160] Further research into the causes of bargaining breakdown or success would indeed be useful. The resulting information could be used to plan some form of state intervention (or intervention by other powerful players) in post-grant transactions involving intellectual property rights, which would be designed to reduce transaction costs. One way to characterise such an intervention would be as an attempt to promote "functional" norms (in the Mertonian sense) that align the interests of individual industry participants with the broader public interest in efficent ongoing research and development. Some scholars contributing to the burgeoning "law and norms" literature seem to favour this approach. However, a more skeptical view would be that such an attempt to intervene directly (from the "top down") in the innovation system is likely to be defeated by the system's complexity. (i) A note on "law and norms" In the late 1980s, the emergence of a new subdiscipline of rational choice sociology created a point of contact between sociologists and rational choice scholars in other disciplines including philosophy, economics and political science. At the time, economists were grappling with the problem of explaining how self-interest could be overcome in the formation and operation of collective institutions. Classical economic theory did not cast much light on this problem, but because of the new interdisciplinary connection, economists found themselves able to draw on a substantial body of sociological research on norms. This "new institutional economics" was picked up in turn by law and economics scholars who recognised the following deficiencies in traditional economic analyses of law ([Ellickson, 1998 #92], page 539-540). First, like the neoclassical economic model, "classical" law and economics ignores socialisation (internalised norms), treating individuals' preferences as exogenous; but legal policies are often designed with the purpose of inculcating people with certain values -- or in other words, shaping their preferences ([Dau-Schmidt, 1997 #89], page 414) . Similarly, classical law and economics tends to underrate the importance of informal systems of social control (externally enforced norms) relative to formal systems (the law); but in reality, norms may often be more important than law, especially in contexts where the stakes of a given interaction are low relative to the parties' desire to maintain a continuing relationship. Finally, classical law and economics theory implicitly gives greater weight to the pursuit of material rewards than to the pursuit of social status, even though conventional economics supposes that an individual can obtain utility from any sort of experience, and in many cases the pursuit of social status may be a more important motivation. (Note that if, as some sociologists of science suppose, powerful socialisation, dependence on membership of a professional community and the pursuit of social status over material rewards are key features of the normative structure of academic science, these deficiencies of classical law and economics theory are perhaps especially relevant in the analysis of interactions within the scientific community.) By the mid-1990s, the legal academy was seeing an explosion in law and norms scholarship, evidenced by a number of special symposia on the topic (in 1995 the American Law and Economics Association had a panel devoted to the economic analysis of norms; in 1996 the Pennsylvania Law Review published a symposium on "Law, Economics and Norms" (144 University of Pennsylvania Law Review (1996)); in 1997 the Wisconsin Law Review followed with its symposium on "Law and Society & Law and Economics: Common Ground, Irreconcilable Differences, New Directions" (1997 Wisconsin Law Review), and in 1998 the University of Chicago Law School co-sponsored a conference entitled "Social Norms, Social Meaning, and the Economic Analysis of Law" (27 Journal of Legal Studies (1998)). Robert C. Ellickson, author of a landmark case study dealing with the settlement of property disputes by Californian ranchers using informal, norms-based rules (Of Coase and Cattle: Dispute Resolution Among Neighbours in Shasta County, 38 Stanford Law Review 623 (1986)), identifies eight different "clusters" of active law and norms scholars ([Ellickson, 1998 #92], page 546-549). These include "law and society" theorists, sociologists (among them Donald Black and James Coleman, a leading proponent of rational choice sociology in the 1980s), game theorists (originating within the discipline of philosophy, game theory now transcends disciplinary boundaries), a number of individuals -- including himself, Robert Cooter, Lisa Bernstein, Richard McAdams and Eric Posner -- and the "New Chicago School", including Lawrence Lessig, Cass Sunstein and Kenneth Dau-Schmidt. (Within law and economics, norms are now a central concern of contracts scholars who pursue Stewart Macaulay's early finding that norms often determine business behaviour more than law - [McAdams, 1997 #91], page 632-633, citing a number of articles at note 41 and 42 -- this may be of relevance to my analysis of negotiations for MTAs...) The ultimate aim of members of this last group, says Ellickson, is the intentional manipulation of norms by the state to achieve desired social goals; but he points out that this aim is not necessarily shared by other law and norms scholars ([Ellickson, 1998 #92], page 549). Besides this point of difference, law and norms scholars disagree on a number of other important issues: terminology, including the definition of "norms"; whether norms generally promote social welfare; and the relative importance of law, external norms and internalised norms to the establishment of co-operation ([Ellickson, 1998 #92], page 549-551; [McAdams, 1997 #91], page 634-636). Nevertheless, all focus on the relationship between the legal system and informal systems of social control.[68] See [Merges, 1996 #57] and [Rai, 1999 #53] (also [Rai, 2001 #54] and [Kieff, 2001 #55]). See also [Merges, 2000 #253]. (ii) A note on complex system effects Anyone who has seen inside a computer knows that it is made of many different parts. Yet a computer is not "just" a collection of parts. If it were, a brand new PC would be no more effective than a random heap of components. (PC manufacturers assure us this is not the case, though appearances are sometimes deceptive.) What distinguishes a pile of plastic and metal from a working computer is the way the parts interact. A collection of parts that interact in specific ways is a system. Systems have properties that cannot be detected by studying the parts individually; these properties emerge only when the system is working. Life itself is an emergent property. Emergent properties can be so unexpected-so seemingly unrelated to the component parts of a system-that we are sometimes tempted to think of them as magic. Music is one example. If you had never heard a violin being played, you would certainly not expect horse-hair being rubbed against cat-gut to sound like Vivaldi's "Four Seasons". Systems can be classified as either simple or complex. The word "complex" is often used to mean "having lots of parts"-especially small parts. Here it has a narrower meaning. Because systems maintain themselves through the interaction of their parts, true complexity relates not to the number or size of parts in a system, but to the number of ways those parts can relate to each other. A jigsaw may have a thousand tiny pieces, but the pieces can be put together in only one way, so the jigsaw is not a complex system. Similarly, a system may be complex even if it has very few parts: if the parts have many possible states, they may be combined in a myriad of different ways. A family may have only two or three members, but family interactions are undoubtedly complex. Since complexity is linked to the connections within a system rather than the parts themselves, scientists who study complex systems have been able to identify certain characteristics that are shared by all such systems. First, it is impossible to change just one element in a complex system: there are always side effects. The more connections there are, the longer it can take for side effects to show up, because the initial change takes time to spread through the entire system. National and international systems of innovation, regulation and intellectual property protection are complex systems. Any deliberate intervention in these systems will have unpredictable effects. This does not mean there is no point in trying to make these systems work better; it just means that such efforts will often |