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Business Innovation and the Law

Business Innovation and the Law

Perspectives from Intellectual Property, Labour, Competition and Corporate Law

Edited by Marilyn Pittard, Ann L. Monotti and John Duns

Business Innovation and the Law analyses the topical issue of protecting and promoting business research and development. It does so by examining business innovation through the lens of different legal disciplines – intellectual property, labour and employment laws, competition and corporate laws.

Chapter 15: Legal protection of business research and development: can it harm competition?

Ray Finkelstein

Subjects: law - academic, competition and antitrust law, corporate law and governance, intellectual property law, labour, employment law


Innovation enhances social welfare. Firms create wealth and employment by generating new ideas and developing them into new or improved products or processes. Consumers, in turn, benefit from these innovations by access to the products and processes and, often, reduced prices. In the modern economy, which is becoming increasingly information and services based, new ideas that result in slight advances in technology and minor improvements in production, can afford firms significant competitive advantages over rivals. Having exclusive use of those ideas can often mean the difference between maintaining and increasing market share and financial ruin. The law provides this exclusive use by protecting information owners against unauthorized interference with, or use of, commercially valuable information. This is a broad category of information (called intellectual property) which encompasses data technology, know-how and the narrow field of trade secrets. One result of this protection is that firms have the incentive to develop new and improved products. Another is that allowing firms to limit the use of their new ideas can discourage free market competition by permitting firms to maintain or increase their market power. I propose to examine how the law enables commercial information owners to prevent competitors making use of their information. I will then consider whether that protection should be cut down by existing competition laws because of an overriding need to maintain competition to ensure social welfare is appropriately advanced. There are several rationales for the protection of intellectual property. The major justification adopted by European jurists is rooted in natural rights thinking.

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