Business Innovation and the Law
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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.
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Chapter 17: Perspectives from competition law

Dorothy Livingston

Extract

The ‘Schumpeterian’ economic school of thought sees the possibility for a successful innovatory business to enjoy a monopoly position (at least for a time, until a new and creative technology comes along to destroy the incumbent’s business) as a key driver for successful innovation and sees competition law constraints on the achievement of monopoly as a hindrance to the full realization of efficient ‘creative destruction’ through innovation. On the other side of this argument, Kenneth J. Arrow argues that ‘the incentive to invent is less under monopolistic than under competitive conditions’. Competition (US ‘antitrust’) law enforcers agree with the Arrow side of the argument: Today, it is widely recognized that patent and antitrust drive innovation in different but complementary ways. Both disciplines promote dynamic efficiency: that is, a system of property rights and market rules that create appropriate incentives for invention, innovation, and risk taking – delivering the greatest returns for society not just for today, but tomorrow as well. The patent grant does this by providing incentives for inventors to take risks and make investments in research and development. Patents transform a claimed piece of intellectual progress into a property right, allowing the inventor to exclude others from using that invention during the term of the patent. Our intellectual property framework further advances follow-on innovation through public disclosure of the invention. Antitrust’s core mission is to appropriately foster and protect the competitive environment by preventing certain conduct that threatens free markets. This environment is what pushes companies to constantly innovate and allows them to profit when they do.

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