Brian Kahin, MIT

Dark Markets, Bad Patents, No Data: Institutional and Information Failure in the Digital Economy

March 26, 2014 | 11:45am - 1:00pm | Baker Library | Bloomberg Center 103 | Open to public

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The process and effects of digitization are studied primarily where unfettered enterprise prevails, where markets are open, and especially on the Internet where activity can be readily observed and measured.  In short, where the light is.  At the edge, things are less clear.  Amplified and modulated by increasingly diverse business practices, the powerful effects of digitization ultimately face the inertia of deeply embedded institutions.  How do firms, policymakers, and the public make practical sense of the interaction? 

After outlining the dimensions of digital transformation, I compare how four different intellectual property regimes have been affected by digitization. I then focus on patents as the most institutionally embedded and complex rights regime. Here the impact of digitization began long ago, but the systemic effects have emerged only over time.  The expansion of patent markets against growing asymmetries of information has led to the first Presidential initiative on patents in half a century, resurgent debate in Congress over patent reform, and, more remarkably, strategic use of patents by nations as well as firms. 

The patent system now bears comparison to the financial sector in terms of its mix of private interests, markets, and public agencies.  While there are no momentous events analogous to the Lehman collapse, there are familiar signs of dysfunction such as positive feedback loops, moral hazard, information failure, and principal-agent conflict.  While the absence of data on patent practice is a limitation, I will draw on available resources to formulate a few conclusions, recommendations, and a set of paradoxes that suggest an agenda for future research.

This work in progress grows out of my long engagement with digitization and the Internet dating to the Information Infrastructure Project at the Kennedy School (1989-1997), my equally long involvement with patent policy in the U.S. and Europe (from different perspectives in academia, industry, and government), and recent work with the OECD project on New Sources of Growth: Knowledge-Based Capital.​