Inequalities, Innovation, and Patents

Abstract

Over the last several decades, the United States has become more innovative and more unequal. As technology is blamed for destroying democracy and jobs and Covid lays bare health and digital inequalities, the question of how innovation’s benefits are distributed has become increasingly salient. But to begin to understand the relationship between inequality, innovation, and patents, this paper argues, requires reframing the question to explicitly take into account the multiple facets of inequality with relevance to innovation. These include not only inequality of wealth and income (economic inequality), but also, equality of opportunity (“innovation producer inequality”), and inequality of access to suitable innovation (“innovation consumption inequality”). Consideration of the “inequalities” not just inequality of innovation permits examination of the synergies and tensions, often unacknowledged, between notions of fairness and innovation. It provides a way to unify disparate accounts and also, to identify the particular mechanisms through which patented innovation and the patent system can exacerbate but also, alleviate various types of inequality. Finally, it underscores the importance of inclusion in innovation – both in its creation, supporting equality of opportunity, economic mobility and the development of solutions to problems that impact underrepresented populations, and its dissemination, directly or through licensing, in support of broad access to innovation goods.

Part I unbraids the concept of “innovation inequality” into the three inequalities - of wealth or income, of opportunity, and of consumption - with relevance to innovation. Doing so highlights surprising contrasts in the optimal conditions for innovation: equality of opportunity to innovate is essential, but so is some modicum of economic inequality, which supports experimentation, risk-taking and racing for rents. Through the lens of the three inventions and new empirical analyses, this part traces shifts in patented innovation over the last century, away from manufacturing, independent and US-based innovation and towards electrical engineering, corporate, and foreign-origin innovation. These developments have highlighted tensions within the inequalities – for example globalization has expanded opportunities to innovate internationally but diminished the importance of ensuring all have an opportunity to participate in innovation domestically – explaining in part why change is hard.

Building on Part I, Part II uses the patent system as a case study for understanding how the law can both intensify as well as alleviate the inequalities of innovation. The patent system is designed to provide individuals and entrants with equality of opportunity, spurring economic mobility and growth, and also to enable eventual broad access, once patents have expired or through licensing. But it is also part of a larger, rigged system in which patents and the patent system are used to discourage competition, through lobbying and strategic lawyering. The tilting of the system in favor of those with invention capital and what I call “invention social capital” (the relationships of invention - to, e.g. role models, lawyers, investors, and lobbyists) has limited equality of opportunity and contributed to intensifying economic inequality.

Part III discusses how the patent system can shore up its commitment to equity and maximization, and a many winner, rather than winner-take-all innovation system, advancing several ideas: being a beacon for the innovation needs of underrepresented populations, addressing the patent grant gap among small and female inventors, diversifying inventorship by diversifying the patent bar, developing and prioritizing innovation equity metrics and rigorously determining what works to enhance inclusion in innovation, and shoring up the metes and bounds of patents.

Keywords: patents

JEL Classification: O34