Friday 8 May 2009

Technology and IP: Is There a Next Big Thing?

An issue that has occupied (some say "preoccupied") me for some time is whether we are entering into a period of technological stagnation. The concern has been expressed, as I recall, by no less an icon than Andrew Grove. While cast in various forms, the claim can be distilled to the following: the growth of the hardware/software revolution from roughly the 1950s to the begin of this decade was accompanied by the rise of new industries worthy of their name--e.g. Intel, Microsoft, IBM and HP. These companies can all be characterized by their success in monetizing technology and the IP rights therein, whereby IP protection is a basic component of commercial success.

By comparison, this decade can be best characterized by Web 2.0, networking, and online social communities. Whether My Space, Facebook, Wikipedia, or You Tube, their success in accumulating the eyeballs of their tens, if not hundreds of millions of user, has not been translated into the kind of monetization that we witnessed in the earlier period. Even the flagship company of this decade--Google-- is still more notable for its stock price than the absolute size of the gross revenue that it is generating. As soon as one leaves Google, the profitability of even the most notable Web 2.0 companies remains clouded. Moreover, from the IP perspective, Web 2.0 is not IP driven-- witness the internal struggle within You Tube, where the increasing adoption of professional contents (protected by copyright) will likely enhance You Tube's profitability, but may well diminish the social (and largely non-IP) experience of its users.

But can it be monetized like a Pentium chip?

Interestingly, when I raised these issues with a prominent Silicon Valley colleague who recently visited our offices, his eyebrows furrowed, and a certain unease was observed in his defense of the technological and commercial future of the Valley. Indeed, a week later my colleague sent me a thoughtful email in which he particularly pointed to biotech as the next new development that will push forward technological development in Silicon Valley and beyond. Maybe yes, maybe no--but even if "yes", somehow I don't see how this industry, with its long R&D and regulatory gestation, and the centrality, almost too much so, of patent protection, as taking the place of the computer and telecon industries, with its dynamic mix of copyright, trade secrets, and patents, as the new beacon of technology.

By "almost too much so, of patent protection", I mean that it appears that biotech, more than other tech industries, tends to rely on patent protection as a sine qua non of competitive advantage. Patent protection is exclusionary by nature, so it is not difficult to imagine a scenario where, if there is notable biotech profitability, and the public comes to view the industry as earning "excessive" profits, there could be a backlash against IP protection, in general, and patents, in particular. If that comes to pass, then the industry and the patent protection on which is relies might well find itself between the proverbial "rock and hard place". The more successful the industry, the greater the pressure to weaken patent protection; the weaker patent protection becomes, the less robust the industry will become.

Pushing the thought a bit further, let's assume nevertheless that the technological future will be a bi-polar world of biotech and Web. 2.0, alongside the commodification of more and more hardware and the increasing reliance on "software as a service" in place of fully integrated software products. How will IP fit into this new world? In my view, one possible answer is that IP will do so in an inverse way. That is to say, industries with a greater reliance on IP protection will likely enjoy greater profits than those industries for which IP is secondary, or the drift of opinion is in favor of weakened IP protection. There will be industries in both camps. If so, the next generation of technological development will be much more patchy from the point of view of commercial success and the level of IP protection.

However, I am not certain that issue has yet become a front and center agenda item. Fareed Zakaria is a leading fashioner of ideas, editor of the International Edition of Newsweek, prominent television commentator, and author of a world-wide best seller, "The Post American World". He was recently interviewed on Bloomberg radio, and a phrase at the end of the interview grabbed my attention. In conclusion, Zakaria expressed the belief that a renewed America will continue to maintain its technological leadership and generate a new era of world-beating developments such as "Google and the iPod."

Don't get me wrong. No one is a bigger fan of the information revolution spawned by Google than I am. As well, the iPod that my family gave me as a birthday present has literally changed my knowledge base, as I obsessively download and listen to podcasts on various topics on a daily basis (including the Zakaria interview itself). So what is it in Zakaria's comment that bothered me? Ironically, it is precisely his choice of examples. Somehow I don't see Google and the iPod as the future functional equivalents to Microsoft and Intel. Indeed, I don't recall any discussion in his interview about biotech and the like or intellectual property (in "The Post American World") more generally. Zakaria is not alone. We still seem far from that day.


  1. Thanks Neil for this very thoughtful piece.

    My reaction is that future innovation will not be in our underlying technologies as much as how we put them to work.

    If you think of the industrial revolution, the big innovations came in the steam engine, internal combustion, the jet engine, forms of mechanization. At first, this was the big news. Then, the really interesting part came with how we used these technologies to create a global economy and produce goods never before imagined.

    The knowledge revolution has been fueled by the integrated circuit, computers and the internet. I'm sure there will be continued improvements in the underlying technology but the real news will be in how we use these technologies to completely remake a huge number of areas: energy, transportation, agriculture, education, health care, manufacturing--all with the goal of zero waste, no carbon and sustainability.

    I think that this will be more than enough to keep us going. But I don't know what the role of the intellectual property system will be in all this.

  2. "How will IP fit into this new world? In my view, one possible answer is that IP will do so in an inverse way. That is to say, industries with a greater reliance on IP protection will likely enjoy greater profits than those industries for which IP is secondary, or the drift of opinion is in favor of weakened IP protection."
    I believe there is a typo, when an inverse relationship is proposed, greater reliance on IP should lead to lesser profits.

    Thanks and Regards

  3. Mukundan,

    Thanks for the comment. Let's see what the empiricists will have to say over the next few years.

    Neil Wilkof

  4. Here's a discussion on "what's Next in Tech"