Opinions and Editorials

Jul. 21, 2022

Network Law Review: Is the West Giving Away the Game? by Jonathan Barnett and David Teece

Through a historically exceptional combination of political and economic freedom, liberal democracies have over the last century achieved an exceptional record of technological innovation. It is often overlooked that converting technological advances into new products and services, which then delivers tangible economic value, has relied on many fundamental building blocks of the market-driven system. The rule of law has allowed and enabled complex transactions among firms that specialize in various segments of the technology supply chain. Chief among them are contractual agreements that have enabled global markets to construct intricate trade and financial arrangements that facilitate the funding, development, and commercialization of innovation (and the sale of products and services) and intellectual property rights.

Over approximately the past decade and a half, competition regulators in the United States and the European Union (and in a case of strange bedfellows, China) have tampered with elements of the rule of law that have supported innovation in the mobile phone business. Specifically, regulators have pursued a policy trajectory that seeks to limit the patent enforcement and licensing capacities of lead innovators in chip design and production for the wireless industry. In taking these actions, policymakers have acted not on sound empirical grounds but on merely conjectural risks of competitive harm. In the process, policymakers have imprudently placed at risk a critical element of the West’s competitive advantage as a technological innovator in its emerging rivalry—as much an economic as a political rivalry—with authoritarian systems. (By “West,” we refer to countries that have robust liberal democratic systems of governance, irrespective of geographic location.)