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Freedom and innovation

K. RAMACHANDRAN

Intellectual property grows in an environment where patents don't become barriers to further innovation.

PHOTO: K. PICHUMANI

EXCHANGING IDEAS: University of Madras Vice-Chancellor S. Ramachandran discussing with Eric Maskin, Princeton University; Francis Bloch, GREQAM, France, and Rajiv Sethi, Columbia University.

It is not everyday that a senior academic from the hallowed Institute of Advanced Studies (IAS) in Princeton walks into a seminar in Chennai and presents some challenging and stimulating ideas.

But when it happened last week, there was, appreciably, a small band of dedicated economists at the University of Madras, eager to listen to the academic-researcher.

Professor Eric Maskin from the School of Social Science at IAS, Princeton, who participated in a seminar on new dimensions in economic theory at the University, had some radical economic "discoveries" to present.

Succinctly put, his study showed that when discoveries are "sequential," (each successive invention building in an essential way on its predecessors), patent protection is not as useful for encouraging innovation, as in a static setting. Indeed, society and even inventors themselves may be better off without such patent protection.

Also, an inventor's prospective profit may actually be enhanced by competition and imitation.

"Our sequential model of innovation appears to explain the evidence from a natural experiment in the software industry," Dr. Maskin declared explaining his studies made in 1999 and updated in March 2006. His partner in the study was James Bessen from the Boston University School of Law and research on innovation.

"I have been interested in the question of intellectual property protection and to what extent innovations need protection," Dr. Maskin later told The Hindu Education Plus.

"There are extremely innovative industries like the software industry. We also saw that there are a good number of imitations, but still this has not had a severely negative effect on the industry. I wanted to study from a theoretical perspective as to under what situations do the patent protection regime work... ."

And his conclusion:

The concept of intellectual property worked securely in a static situation. But in a situation of sequential discoveries the results are overturned. In other words, patents may be desirable to encourage innovation in a static world, but in a sequential setting (as software innovations), patents are less important and they will actually inhibit complementary innovation.

Alluding to practical situations studied earlier by others too, Dr. Maskin noted that strikingly, firms that obtained the most software patents, actually reduced their R and D spending relative to sales after patent protection was strengthened.

Balanced policy

The study suggested an ideal and balanced policy that will limit "knock-off" imitations, but allows developers who make similar but potentially valuable complementary contributions. So copyright protection for software programmes may achieve a better balance in their patent protection.

When pointed out that his paper laced fully with complicated mathematical models of economic theories, a smiling Dr. Maskin agreed that economics indeed had become a more mathematical subject.

"But then that is because tools of statistics have increased and they have proved very useful in organising our thoughts and analysing evidence... In the last 25 years, we see a great increase in the availability of economic data, both at the micro and macro economic levels.

"The sources of data collection are much more detailed and reliable than earlier. In development economics too there is much better raw data available today. The methods of analysing them has become more complicated. But then today's computers are able to take in and manipulate huge amounts of data and this had improved empirical analysis," the professor said.

According to K.S.S. Uduman Mohideen, head of the economics department in the University of Madras, two more noted economists Professor Rajiv Sethi from Columbia and Professor Francis Bloch from GREQAM, France, added value to the seminar by their presentations in areas such as dynamics of group inequities and informal insurance.

Vice-Chancellor S. Ramachandran said the endeavour now was to stimulate more intellectual interaction by bringing in noted academics as it was done in this seminar.

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