Saturday, February 5, 2011

On Sustainable Materials Innovation

A recent article written by James Moody over at SEED Magazine [1] describes a new approach to getting around Intellectual Property (IP) roadblocks experienced in developing countries.  For example, in areas where food is in short supply, where it is insecure, or in areas where malnutrition is frequent, there are technologies which may solve these problems.  However [1]:

"Many key technologies are covered by patents, because the people and companies that have invested in research and development have a reasonable expectation for profits.  Companies have been making valuable patents available for humanitarian uses for years, but quite often it has been an ad hoc effort requiring intensive legal work and expense for both [Non-Governmental Organization] NGOs and corporations."

Companies require a sufficient market potential / size in order to justify spending the time, energy, and resources necessary to develop a product - be it food, drug, material, or otherwise.  In addition, the research and development of a new product can be slowed significantly navigating through the existing IP space and avoiding infringement.  Moody's proposed solution is a Global Responsibility License (GRL) - a modular or temporary release of patent information by a patent holder to a public or not-for-profit organization.  Such a license would allow the utility of patent information for 'non-market' uses, specifically for humanitarian and development purposes; the patent holder, meanwhile, retains the economic value of the patent while further developing a new market opportunity for it.

But is this the whole story?  And do the problems outlined by Moody translate to the materials industry and its innovations?  In order to answer these questions, I'll draw from previously published works on these subjects.

Conflict, Innovation, and IP

As described by Eisenberg and Nelson [2], fundamental innovation conflict arises when trying to divide between basic science and applied technology, or, alternatively, the public and private domains. "The challenge for public policy is to devise arrangements that preserve the great advantages of an open system for basic science while still preserving profit incentives for the creation of valuable new products."  Additional conflict arises when access to even basic science becomes restricted, such as through [2-4]: ownership of research results, inefficient patent pricing, broad patent scoping, or exclusivity licensing.  On the other hand, Nelson has argued that problems of 1) assembling permissions or licenses prior to performing work, and 2) access limitation by patent holders to research having high practical promise, are not significant and of limited evidence [3].

It has been said [2] that businesses, "driven by the hope of profit and the fear of competition, have a far better feel than government agencies for the kinds of new products the market wants and can respond more quickly to emerging demand and technological opportunities."  One example given is the development of medication for AIDS patients in sub-Saharan Africa.  In this case, government subsidized the access to these inventions made by private research and development groups [2].  Similarly, the One Laptop Per Child program was in part funded by the United Nations.  On the other hand is the drive of the scientific community to contribute significant research to the scientific commons.  As outlined in [2], public funding was instrumental in the Human Genome Project; it helped generate research results in the public domain, thereby making the human genome sequence freely available.

Aside from the examples provided above, there have been proposals to further improve the efficiency of general research and its navigation through IP space.  Nelson [3] describes the incorporation of a "kind of research exemption, analogous to the fair use exemptions in copyright law, into patent law."  However, the Bayh-Dole Act encourages Universities to claim IP rights to data or technology developed during publicly-funded research; this leaves industry less willing to provide such research exemptions [2,3].  A solution may be met if the exempted research was agreed not to be patented; but Nelson believes this kind of exemption may still require a trip through Congress.  As this appears to be the kind of solution proposed by Moody [1] - but for humanitarian instead of research purposes - some work would be required to clearly define the divide between the two.      

Application to Materials Industries

The method and pathway to innovation varies significantly from field to field [4,5]. In other words, while the solution proposed by Moody may apply to some industries, new materials and their innovation do not necessarily require the same pathway or experience the same difficulties.

While considered the "source of revolutionary technologies," Maine et al [6] argue that there are two key barriers to management of new materials: 1) the long gestation period between material discovery and market introduction, and 2) the large cumulative investment necessary to commercialize them.  Of the former, I previously noted that a time period of 15 years can be required; Maine [7] lists examples of new materials innovations which have gestation periods of 20 years or more.  These mismatches and delays can be due to a number of reasons, such as separation between material and end user, unsuitable research & development (R&D) corporate strategies, or flawed R&D valuation methodologies [6].  Because of the significant costs and risks involved, therefore, IP and its ownership is critical to extract value from materials innovations; it is also critical to sustainably guide future material developments [6,7].  Maine et al [6] have recently developed an Investment Methodology for Materials (IMM) in order to help focus industry 1) on materials development and investment and 2) reduce this gestation time.  Critical in the IMM is Value Capture, the IMM component that pays particular attention to the material appropriability, i.e. the measure of degree of IP protection.

IP space traversal in the materials industry is also unique.  For example, technical alliances and collaborations are frequently undertaken between companies; collaborations preferred are generally of the small, simple, flexible, temporary, and collective type [8], somewhat analogous to Moody's proposal.  Through collaboration, a number of benefits can be realized [8], most notably the increase in innovation speed and avoidance of roadblocks by existing patents.  In fact, Niosi [8] notes that Canadian advanced materials companies could easily "invent around" existing patents, or they would simply label the results as trade secrets.  In cases where IP was generated, the main problem was found to be its division between partners, which could be defined at the outset [8].

Sustainable Materials Innovation

The materials industry, despite being a unique field, may still encounter the difficulties outlined by Moody n future innovation.  In particular, ownership of research results, inefficient patent pricing, broad patent scoping, or exclusivity licensing may increasingly exclude users from performing research or otherwise socially valuable activities [2,3].  While ownership of research results may be bypassed with non-patent agreements; while costs may be relieved by the allocation of public funds in cases where private firms have little financial incentive; while patent scoping may be narrowed through the patent office and courts; and while license acquisition can be resolved by patent holders making information widely available and on reasonable terms, considerable work is needed to examine the real economic cost of the current system [3].

Epilogue: Sustainable Materials Innovation in Canada

Canadian manufactured goods focus more on the use of traditional rather than advanced materials [8].  As a result, in Canada there is generally a small market for advanced materials development, and weakness of their production and use in the private sector [see 8].  Sustainable materials innovation in Canada may then possess a cautious optimism.  Due to the sheer volume of these native, traditional materials, sustainable materials innovation in Canada is well-suited to focus on their appropriation.  On the other hand, by focusing too narrowly on such traditional materials, Canada risks the danger of falling behind others in emerging materials markets and industries, missing out on new high-technology industries, and slowly diminishing its market share.

[1] J. Moody.  On re-thinking IP.  SEED Magazine, January 31, 2011.  (Available On-Line.)
[2] R.S. Eisenberg, R.R. Nelson.  Public vs. proprietary science: a fruitful tension?  Academic Medicine, Vol. 77 (2002) pp. 1392-1399. (Available On-Line.)
[3] R.R. Nelson.  The market economy, and the scientific commons.  Research Policy, Vol. 33 (2004) pp. 455-471.  (Available On-Line.)
[4] R.P. Merges, R.R. Nelson.  On the complex economics of patent scope.  Columbia Law Review, Vol. 90 (1990), pp. 839-916.  (Text Available On-Line.)
[5] S.G. Winter.  Patents in complex contexts: incentives and effectiveness.  In: Owning Scientific and Technical Information (1998) pp. 41-60.
[6] E. Maine, D. Probert, M. Ashby.  Investing in new materials: a tool for technology managers.  Technovation, Vol. 25 (2005) pp. 15-23.
[7] E. Maine.  Innovation and Adoption of New Materials.  Ph.D. Thesis, University of Cambridge (2000).
[8] J. Niosi.  Strategic partnerships in Canadian advanced materials.  R&D Management, Vol. 23 (1993) pp. 17-27.

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