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Briefing Overview

Title: Mass Innovation: short of potential
Author: Peter Kingsley
Approx. Reading Time: 4 minutes

Briefing

Mass Innovation: short of potential

The global patent system is criticised for failing to anticipate or adapt to rapidly changing global conditions. The irony is that a global system of collaboration that protects inventions and inventors stands accused of a failure to re-invent itself. Yet invention underpins systemic innovation, productivity growth, global trade, wealth creation and social progress.

Neither the patent system, nor the WTO rules reflect present-day realities. Global productivity has languished for decades, in part through systemic failures in trading ideas. This is despite the fact that returns on intangible assets are higher than both manufacturing and finance. Even so, tangible products are ideas. About 40% of US exports have embedded IP. Since everyone would benefit from cross-licensing of ideas and technology, with just rewards for inventors, the world is poorer.

At the same time trade wars risk undermining the entire system, with all its flaws. The current reality is that ideas, inventions and wider systemic innovation are highly collaborative and so interdependent. The system is fragile because it is vulnerable to the whims of politics.

Rewarding Elites

One of the structural failings is the lack of diversity. The current patent, intellectual property and innovation systems favour major companies in the vanguard of new technology development and elite groups with the resources and expertise to understand the risks of theft in sharing ideas. These same groups are better positioned to navigate legal challenges about prior art and how to nurture promising ideas through to commercial realisation.

The systems reward specialists and promote rent-seeking behaviour amongst investors. They also favour developed countries and inhibit cross-border, global trade in ideas.

More important, they favour specialist knowledge. Domain expertise in specialist science, technology and strategic business models is a given. Yet even for the elite, developing intelligence about closely guarded trade secrets, early stage inventions, patents and potential opportunities to create portfolios of integrated ideas presents major and often insurmountable challenges. In other words, the talents and toolkits for developing insight into early stage ideas and systems of innovation are rare. The rate of change means key inventions are spotted late.

This is made worse by the fact that knowledge about the system is often underestimated. For example, inventing in ‘white space’ depends on understanding the gaps in patent filings and knowledge that converge with unmet needs and unarticulated future market opportunities. The world’s great inventors are white space specialists. Intelligence about where to look for it is a vital prerequisite for success.

Grassroots

Taken together, as Roberto Unger put it recently, the production system excludes the ‘vast majority of businesses and workers’.

Edmund Phelps and Eskil Ullberg take a similar line, arguing that factors like these and “forced technology transfer… have shut out grassroots inventors”. This means that millions of ideas never reach global markets. Some leading anthropologists, like Arjun Appadurai, argue that mass-innovation in countries like India – a nation of entrepreneurs – is inhibited because knowledge is not shared and easily accessible. Lack of knowledge stands in the way of imagining how new technologies may work to solve local, or global problems.

At root this is an education challenge, but even a radical overhaul of education will not solve systemic failures that in practice favour the knowledge elite. The bureaucracy has created a system that does not encourage high-risk high-reward innovation, but incrementalism and replication of other people’s ideas.

From another perspective, the current system adds to the risks of lose-lose for emerging economies. Western companies typically focus on high-return products and services designed for the rich, not the resource poor.

This is made worse by member states of the World Trade Organization (WTO) who do not respect foreign companies’ claims to their inventions across borders. This is at the root of the current ‘ideas war’ between the US and China. Lack of mutual trust threatens everyone’s interests.

Yet even this is not well understood. Over decades, integrated supply chains and IP licensing agreements have created a global system of trade so complex and so interdependent that it is opaque to policy-makers and even corporations themselves. To illustrate, China may respond to the current waves of US tariffs by cutting back exports of rare earth materials essential to digital technologies. US companies may also be a target. To put this in context, China made up about 20% of Apple’s 2018 revenue.

Realising Potential

There are changes in the air. In the short-term, artificial intelligence is playing an increasingly important role in dealing with some of the fundamental problems. Bespoke, well-trained machine learning using comprehensive datasets and specialist domain knowledge can identify weak signals of disruptive ideas. Algorithms can be refined, by experts, to pick out the emerging narratives that surface early clues. ‘Novelty’ and ‘non-obvious’ steps, the essence of patents, tell stories. Machine learning can also deliver some level of predictability, from the outset, about which ideas will complete the journey from say scientific paper, to patent development, to patent filing and commercial launch.

Patents are, after all, highly codified. This leads us to another possible long-term outcome: the emergence of more robust, collaborative IP licensing and trade. Long dreamt of ideas about ‘patent exchanges’ may gain traction amidst the growing trade crises. This may then contribute to the long-term convergence of novel ideas and remote 3D manufacturing. Ideas and licenses will be sold across boundaries to local producers using low-cost 3D printers. On the horizon, we may see an rapid increase in the trade in ideas and the steady decline of trade in finished products.

Peter Kingsley
May 2019
 

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Briefing Overview

Title: Mass Innovation: short of potential
Author: Peter Kingsley

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