Research Policy 31 (2002) 14911507

Establishing a new intellectual property rights regime

in the United States
Origins, content and problems
Benjamin Coriat
a,
, Fabienne Orsi
a,b
a
CEPN-IIDE, CNRS Research Unit 7115, Paris 13 University, 99 Avenue JB Clement, 94430 Villetaneuse, France
b
INSERM, Research Unit U379, University of Mditerrane, 232 Bd. Sainte Marguerite, 13009 Marseille, France
Received 24 September 2001; received in revised form 16 October 2001; accepted 20 March 2002
Abstract
Major changes have been made over the past 20 years in the USintellectual property rights regime. These include the fact that
the regime has been opened up to software patents and to business models, on one hand, and to living entities on the otherall
within a general environment marked by the relaxation of patentability criteria. They have resulted in major changes in the US
system of innovationmore specically in the increasing privatisation of knowledge domains and activities that were previ-
ously public. The changes result from the combined effects of a response to US perceptions of increased foreign competition,
of the emergence of major new technological opportunities in biotechnology and ICT, and of a series of regulatory changes
that have paved the way for the nancial sectors increased involvement, via direct investments in rms whose main activity
is comprised of R&D. Contemporary doubts about the viability of these changes reect, the harmful long-term economic
effect of the privatisation of basic knowledge (especially in the biopharmaceutical sector) and the difculties that the nancial
sector has faced in ensuring the sustainability of the necessary pre-conditions that allow for the development of innovation.
2002 Elsevier Science B.V. All rights reserved.
Keywords: Intellectual property rights; Innovation; Biotechnology; Computer program; Financial market
1. Introduction
In order to highlight the signicance of the changes
that have taken place in the area of intellectual property
(as well as its effects on the conditions for producing
and diffusing innovation), the present paper has been
articulated and organised as follows.
Section 2 recaps some of the main ndings from
the eld of economics of patent and innovation, in an

Corresponding author. Tel.: +33-1-45-83-36-04;

fax: +33-1-45-83-36-04.
E-mail addresses: coriat@club-internet.fr (B. Coriat),
f orsi@club-internet.fr (F. Orsi).
attempt to clarify how, and to what extent, the new
regime deviates from traditional analysis and practices
in this area. Some of the legislative changes (initiated
by Congress to reinforce the PR regime) are presented
and analysed; they have been re-situated in the spe-
cic environment of the time, characterised by a sharp
drop in American rms competitiveness (Section 3).
The analysis then focuses on two specic domains:
the continued extension of the area of patentability
to computer programs, mathematical algorithms and
business models (Section 4); and to living entities
(Section 5). These two elds were chosen because
they have experienced the most dramatic changes. In
Section 6, the paper presents the concomitance of
0048-7333/02/$ see front matter 2002 Elsevier Science B.V. All rights reserved.
PII: S0048- 7333( 02) 00078- 1
1492 B. Coriat, F. Orsi / Research Policy 31 (2002) 14911507
change in the IPR systems and nancial sphere and
the related changes it has generated as regards the
nancing of innovation. The conclusion (Section 7)
raises questions about the long-term sustainability of
this type of regime in the light of recent developments.
2. Basic principles of the economics of patents,
IPR and innovation
To highlight the nature and meaning of the changes
that have affected the eld of innovation, we think it
useful to recall some of the basic principles that have
been put forward to explain why certain institutional
arrangements (Arrow, 1962)in actual fact differing
types of IPRand public incentiveshave been deemed
necessary so that R&D activities can maintain a so-
cially sufcient level of dynamism (Nelson, 1959).
Two series of contributions should be recalled at
this juncture, inasmuch as they were once considered
to be the theoretical foundations of any type of IPR
system.
2.1. Information, knowledge and the trade-off
between private and social costs
Building on propositions that were rst formulated
by Nelson (1959), Arrow introduced in a seminal
paper he published in 1962 the idea that knowledge
whenever it can be assimilated to informationis
a good that will present a number of specic char-
acteristics. In particular, the indivisible nature of
knowledge means that whatever its production costs,
subsequent reproductions cost nothing or next to noth-
ing. This attribute is at the origin of market failure
as well as free rider problems. Insofar, as market
mechanisms are unable to offer those solutions that
will induce rms to make a socially optimal level
of investment in the production of knowledge, society
as a whole runs the risk of always under-investing
in knowledge production. To overcome this type of
market failure, non-market mechanisms are needed to
create the right types of incentives.
Two types of fundamental incentives can be de-
signed:
(1) Patents: These are partial and temporary monop-
olies that are awarded to inventors under a given
set of conditions. They are the rst institutional
arrangements helping to overcome the free rider
problem.
(2) The allocation of public funds to research (and
especially to basic research) is the other direc-
tion in which these non-market mechanisms can
go. Here, the information and knowledge that has
been produced as a result of public subsidies is
made available to everyone for zero cost and it
is the taxpayer who covers the cost of delivering
the public good needed to maintain the type of
knowledge ow that makes it possible to ensure
societal progress.
It is noteworthy that in both cases (patents and/or
public subsidies), the main issue is how to limit the
innovations social costregardless of whether this
cost is to be covered by the consumer or by the tax-
payer.
2.2. Open science versus private science
Our understanding of the world of basic and/or pub-
licly funded research was enhanced by Dasgupta and
Davids (1994) seminal paper, devoted to an analysis
of the world of open science.
1
In essence, analysis of the world of open science
highlights those specic co-ordination mechanisms
that are at work in this area of R&D activities. It offers
cogent arguments relating to the relative efciency
of the whole range of formal and informal rules that
govern this world (open publication and communica-
tion, priority rules for inventors/discoverers, etc.)
and contrasts them with the rules governing the world
of private innovation activities, also called the king-
dom of technology (based on secrets, patents and
rent-seeking).
In actual fact, these two worlds are interconnected
by many subtle relations, both formal and informal.
However, from a theoretical point of view, we should
remember that the key principle underlying the ra-
tionale for the various types of non-market mecha-
nisms that have been designed and implemented in the
worlds different national innovation systems (NISs)
is the distinction between the granting of patents
to reward private innovators, on one hand, and the
1
On the economics of science and the importance of basic
research for innovation see also Pavitt (1991).
B. Coriat, F. Orsi / Research Policy 31 (2002) 14911507 1493
allocation of public subsidies to fund basic research
on the other.
One of the present papers main theses is that the
traditional borders between these two worlds and
logics have partially disappeared, giving birth to a
completely new regime of IPR. The following sections
constitute an attempt to demonstrate the context within
which such changes were introduced and to highlight
the qualitative nature of the mutations that have taken
place in the intellectual property regime.
3. The new orientations of public innovation
policies
To understand the context within which these
changes took place, the right starting point is clearly
the 1980s and the debate that took place amongst in-
dustrial strategists and policy makers at the time, one
in which many top academic scholars took part.
3.1. The environment of the 1980s: a short word on
the origins and scope of these changes
Under the title What happened in the 1980s?,
Hunt wrote: during the late 1970s and early 1980s,
businessmen and policy-makers became increas-
ingly concerned about the apparent deterioration of
Americas comparative advantage in high technology
industries, such as the semiconductor industry. In fact,
trends within that industry became a catalyst for dra-
matic changes in the way the US protects intellectual
property (Hunt, 1999a).
As demonstrated by a long list of essays (of which
Tysons 1996 book was undoubtedly the most typi-
cal expression), received wisdom at the time held that
American rms loss of competitiveness could be at
least partially explained by two features of the US
NIS.
2
On one hand, the system was thought to be both
excessively geared towards basic research and also
poorly designed for delivering concrete results to rms
in a quick and efcient manner. This was especially
2
For an comprehensive analysis of the causes of the US
economys loss of the competitiveness, one can refer to the famous
essay published by the MIT under the title Made in America
(Dertouzos et al., 1989).
critical in an age where time-to-market had become
a key competitive argument. On the other hand, more
and more people felt that it was too easy for corporate
rivals to appropriate the research ndings of an R&D
program that had been carried out in the US, inasmuch
as these ndings were insufciently protected by the
patent system. In circumstances such as these, for-
eign rivals (notably Japanese rms) could easily take
advantage of American discoveries and inventions, at
very low cost, and convert them into a series of prod-
ucts that would then be competitive in the domestic
US market itself.
3
This point of view, which quickly began to dom-
inate decision-making circles, gave birth to a series
of studies and works that were often sponsored by
government authorities and which were intended to
modify the general operational framework of the dif-
ferent actors involved in innovation activities. Finally,
the changes that took place lead to the building of a
series of new institutional complementarities (Aoki,
2000) between different types of provisions. Within
20 years, these would totally change the dynamics
of the US NIS. Table 1 provides a partial idea of the
importance of this legislative activity throughout the
1980s and early 1990s.
Section 3.2 concentrates on two of the changes that
helped to dramatically modify the operational frame-
work in which innovation actors were working.
3.2. The BayhDole Act and the implications thereof
The rst major change is the 1980 Patent and
Trademark Amendments Act, better known as the
BayhDole Act. This Amendment Act paved the way
for strategic changes in American State R&D poli-
cies by creating a series of incentives and legal tools
allowing public research institutions (universities and
public labs) to patent their ndings and to exploit the
fruits thereof, either directly through the start-up of
new businesses (made up of university teams, often
in the form of joint ventures with private enterprises)
or through the exclusive licenses that were awarded
to external for-prot institutions.
3
A book edited by Branscomb et al. (1999) proposes a series
of well-documented papers recalling the very peculiar climate
prevailing in the 1980s in the US. For a presentation of the US
NIS in the early 1990s (Mowery and Rosenberg, 1993).
1494 B. Coriat, F. Orsi / Research Policy 31 (2002) 14911507
Table 1
Selected legislation enabling a competitiveness research and de-
velopment policy
a
Year legislation
1980 Public Law 96-480, StevensonWydler
Technology Innovation Act, as amended in
1986 and 1990
1980 Public Law 65-517, Patent and Trademark
Amendments Act Patent and Trademark
Amendments Act and 1983 Reagans memo
on the governments patent policy
1981 Public Law 97-34, Economic Recovery Act
1982 Public Law 97-219, Small Business Innovation
Development Act
1983 Public Law 97-414, Orphan Drug Act, as
amended in 1984, 1985 and 1990
1984 Public Law 98-462, National Co-operative
Research Act
1986 Public Law 99-502, Federal Technology
Transfer Act
1986 Public Law 99-660, Drug Export Amendments
Act de 1986
1987 Presidential Executive Order 12591
1988 Public Law 100-418, Omnibus Trade and
Competitiveness Act
b
1993 National Co-operative Research and
Production Act
1993 Public Law 103-182, North American Free
Trade Agreement
1993 Public Law 230-234, Defence Appropriations
Act, Technology Reinvestment Program
1994 Public Law 103-465, General Agreement on
Tariffs and Trade
Remark: Asides from the Patent and Trademark Amendments Act
that was voted in 1980 to which we shall revert below, other
elements of note in the new arsenal that Congress set up included:
(i) the National Co-operative Research Act (1984) which authorises
the relaxation of anti-trust regulations as regards R&D-related
co-operation; and (ii) the Trade and Omnibus Act (1988), notably
section 301 special dedicated to defending US rms IPR at an
international level. Due to a lack of space, the present paper will
not examine these two laws (and their effects) in any great detail.
a
Source: Slaughter and Rhoades (1996, p. 317).
b
Coriat (2000) offers an analysis of the conditions under which
the 1988 Omnibus and Trade Act, including its IPR-specic
301 special section, was originally promoted.
Partisans of the BayhDole Act defended its insti-
tution of a license-based rent system by saying that if
rms have exclusive rights to exploit the new discover-
ies that stem from the basic research being carried out
in state laboratories, the investment returns on public
research will be enhanced and corporate competitive-
ness can be restored. Summarising the spirit of these
new provisions of the Act, Mowery et al. wrote that
the Acts provisions represented a strong expression
of support for negotiation of exclusive licenses be-
tween universities and industrial rms for the results
of federally funded research. In the end, it constituted
a Congressional endorsement of the argument that fail-
ure to establish patent protection over the results of
federally funded university research would limit the
commercial exploitation of these results (Mowery
et al., 1999, p. 274).
It is important to note that these new provisions
coincided with the technological breakthroughs being
made by academic researchers in IT and biomedicine.
This point was emphasised in a recent empirical study
by Mowery et al., who compare changes in patenting
and licensing activities at Stanford, UC Berkeley and
Columbiathese having been the three institutions
that for years played a crucial role in biomedical and IT
research (today they are still amongst the most active
of all American universities involved in the patenting
movement (Mowery et al., 1999).
4
Our objective here is not to discuss the impact of the
BayhDole Act on university patenting and licensing
in any great detail. Extensive literature already exists
towards this end.
5
For the purposes of the present pa-
per, it sufces that we highlight the nature of the quali-
tative changes that the BayhDole Act introduced and
that we put them in the context of the other changes
that have affected US IPR regime.
3.3. The Court of Appeals for the Federal Circuit
(CAFC) and the easing of patentability conditions
Congresss 1982 adoption of the Federal Courts Im-
provement Act (FCIA), which created a unied judi-
cial appellate authority for all cases relating to patent,
trademarks, government contracts, tax and interna-
tional trade represents another major institutional in-
novation that Congress introduced as part of its new
policy.
4
More generally, Jaffe (2000) in his very precise and detailed
analysis of the changes in the US patent system argues that the
number of patents granted to universities rose from 25,00030,000
per annum in 19791984 to 45,00050,000 after 1984, reaching
80,000 in 1998.
5
On this point, see Mowery et al. (1999).
B. Coriat, F. Orsi / Research Policy 31 (2002) 14911507 1495
These Courts of Appeal were initially created as a
response to demands from rms who were decrying
previous Court decisions lack of homogeneity from
one American state to the next. In actual fact, the
new Courts of Appeal happened to be much more
pro-IP and open to patenting than their predeces-
sors had been. Amongst the changes they introduced
was a new and extended meaning attributed to the
Doctrine of equivalents, used to provide patentees
with strong protection by broadening their pro-
hibitory rights (Jaffe, 2000). Above all, according
to most observers the non-obviousness criterion
was easedwith one declaring that many patent
attorneys believe the obviousness defence to be dead
and that the cause of the death lies in the decision
of the CAFC (Krastiner, 1991). As a result, the
USPTO, which continued initially to make rulings
that were based on the more rigorous traditional
criteria, modied its doctrine. This was publicised
in a series of formal statements that were aimed at
putative patent registrants. The change of doctrine ap-
pears very clearly in the last Utility Guidelines that
the USPTO published on 5 January 2001 (USPTO,
2001a,b). A direct consequence of these changes was
the huge surge in the number of patentsan out-
come that in our view was indicative of the change in
regime.
Many other institutional changes, all of which were
aimed at increasing rms R&D activity-based com-
petitiveness, can be mentioned. Still, the two afore-
mentioned series of changes sufce for the purposes
of the present paper, given that, in our opinion they are
clear enough indicators of the direction and dimension
of the changes that were introduced.
The two following sections deepen and extend this
analysis by focusing on the changes that have taken
place in the two key areas of IT and biotechnology.
In so doing, they specify the impact that legisla-
tive reform has had on the way in which US NIS
functions.
4. Between copyright and patent: devising a
specic American right for software packages,
computer programs and business models
A clear illustration of the dissipation of the tradi-
tional borders between open and private science is
provided by an analysis of changes in software-related
IPR.
6
4.1. The progressive shift towards the patentability
of mathematical algorithms
Analysis here begins in the 1970s, a decade of
rapid expansion for the software industry in US,
specically as a result of the design and rapid dis-
semination of autonomously endowed software
packages that could migrate from one machine to an-
other (inter-operability). Two related but divergent
issues soon cropped up:
(i) the battle against piracy (illicit copies prepared for
commercial purposes);
(ii) rival rms imitation of existing solutions: this lat-
ter issue is a particularly complex one, inasmuch
as in a world that has chosen to open itself up
through an extension of compatibility there is little
difference between straightforward imitation (i.e.
the imitation of existing software packages being
sold in the market under different brand names
but without any substantial improvement) and the
need to adapt existing products so that they offer
improved software solutions which can be com-
patible with users practices and with prevailing
standards.
We should remember that the CONTU Commis-
sion, whose recommendations became the benchmark
in this eld, was originally organised within this en-
vironment. After intensive consultation, the CONTU
came out in favour of extending and deepening the
copyright principle so that software could be covered
under its provisions. These recommendations were in-
corporated into the Computer Software Act of 1980. In
practice, however, the design of this legal framework
(which suggests that software be covered by Copy-
right Law), proved unable to offer a denitive solution
to this problem. A 1982 Courts of Appeal ruling found
that the Computer Software Act provided a framework
which was too narrow and restrictive. Often overruled
by (or subordinated to) a major Supreme Court rul-
ing, the Courts of Appeal ended up by introducing a
6
For a recent review of the main changes in jurisprudence,
especially regarding business models (Merges, 1999; Liotard, in
press).
1496 B. Coriat, F. Orsi / Research Policy 31 (2002) 14911507
common practice of software patenting through their
own jurisprudence. As such, there has been a pro-
gressive shift from a copyright to a patent-based
regime.
Other shifts would result from a jurisprudence that,
from one ruling to the next, extended the principle
of software patentability to new areas. At this point,
it should be remembered that from the 1950s to the
1970s, the USPTO had taken an overtly hostile posi-
tion to the patenting of computer programs. It had done
so because of the very nature of such products, which it
analysed as a sequence of abstract stages and/or math-
ematical algorithmscharacteristics that are explic-
itly excluded from patenting by the US Patents code.
Besen and Raskind (1991), in their exhaustive survey
of changes in the IPR system, wrote, when Visicalc
was developed in 1979, the Patent Ofce, relying on
Supreme Court case law, took the position that the
mathematical algorithms in computer programs were
not a protectable subject matter. In this view, soft-
ware that is assimilated to a procedure for solving a
given type of mathematical problem
7
could not be
covered by Patent Law.
It remains that this situation would change quickly
after the Supreme Court Diamond versus Diehr
(1981) ruling which introduced a radical change of
doctrine. According to Besen and Raskind, this ruling
negated previous Supreme Court decisions by nding
. . . patentable subject matter in a process utilising a
computer algorithm. Since that case the Patent Ofce
has begun to grant patents to computer programs
(Besen and Raskind, 1991). Diamond versus Diehr is
an important case insofar as it supports the idea that
if software could not be patented per se, when it was
introduced in a process, it could be patented as long
as this process satised the conditions that were stipu-
lated under the Law, namely the utility requirement.
Nevertheless, this was only the rst step of the
change process. In actual fact, jurisprudence would
7
See the famous case of Benson S. Ct 175 USPQ 673 in which
after a long judicial process the Supreme Court ended up by
rejecting a patent application. This was a key ruling that would
have ultimately have long term jurisprudential value. The Supreme
Courts main argument was that it is justiable to refuse to patent
a computer program that is based on algorithms that cannot be
patented. For a detailed presentation of previous and of subsequent
jurisprudence on software package patentability, see Samuelson
(1998).
gradually shift from a situation in which the existence
of an algorithm in a computer program could not con-
stitute a motive for refusing the award of a patent to
a situation in which: (i) the patent could be granted
to programs (including algorithms) if they offer some
kind of industrial utility (as long as a precise and care-
ful technical description of the invention justifying the
award of a patent was also patented); (ii) the patent is
granted to pure business models or intellectual meth-
ods without any need whatsoever to demonstrate its
utility through detailed technical descriptionswith
the method itself now being protected.
This development was nally concretised in the
famous case of Street Bank and Trust versus Sig-
nature Financial Group (based on a 1998 CAFC
ruling) marking jurisprudential recognition that sim-
ple methods can be patentedas long as they are
automated (Merges, 1999; Liotard, in press; and the
USPTO White Paper on Business Models, 2001).
Other precisions are needed to complete this anal-
ysis of the specicity of the new American software
patent regime. This is a highly complex and unstable
eld, and the present paper does not aspire to deal
with it in an exhaustive manner. However, there is at
least one dimension of this new legal framework that
has to be claried. It concerns recompilation rights.
4.2. The recompilation issue
Recompilation means the right that an individual
is either granted, or else refused, to freely access a
given programs source code, to modify it and im-
prove it. This is a crucial factor, since by giving new-
comers access to source codes it creates the necessary
pre-conditions for the products inter-operability and
therefore, their improvement. Remember that the soft-
ware packages that you can buy in the market con-
tain defects and bugs. This limits the uses to which
consumers can put these products. Moreover, editors
sometimes deliberately introduce some of these short-
comings into their programs. For these reasons, source
code access is a highly sensitive and strategic issue,
with varying approaches having been followed in dif-
ferent parts of the world.
8
8
A 14 May 1994 European Union directive authorizes recompi-
lation that enhances the programs inter-operability, thus ensuring
that users benet from a modicum of adaptability so that they
B. Coriat, F. Orsi / Research Policy 31 (2002) 14911507 1497
After a period of hesitation, the recompilation issue
was claried in the US, once again via jurisprudence,
with the Supreme Courts Sega versus Accolade ruling
(which has since become a benchmark in this eld).
This ruling, which protects source code access, is a
fundamental one. It has created a situation in which
certain large incumbent rms can force some of their
products on the rest of the market, imposing them as
de facto market standard. Moreover, they can use the
benets of network externalities to establish virtually
unassailable monopoly positions. Recent anti-trust ac-
tions against Microsoft showhowBill Gates company
has been able to use some of the Laws stipulations
in a strategic manner so as to prevent any real com-
petition from taking place in a wide range of products
and services.
9
In short, and even if these new provisions may open
up some market niches for a few small but highly spe-
cialised editors, the cumulative effects of the newtypes
of property rights awarded on computer software, cou-
pled with the existence of network externalities, cre-
ate conditions that help the big software editors to
strengthen their long-term situation. This is because
monopoly advantages are being twinned with the ben-
ets of network externalities (Arthur, 1989)a situ-
ation that, in the words of two successive presidents
of the FTC, has created a whole new set of difcult
problems for anti-trust policies in this area (Pitofski,
2001; Muris, 2001). Such were these problems that
the regulatory authorities had to launch a new series
of hearings on this subject in 2002.
5. From the Chakrabarty ruling to the
patenting of human genes: a new IPR regime for
living entities
The developments that the present section discusses
are certainly amongst the most spectacular and illus-
are not restricted to the programs being sold by just one editor.
As such, this right favors the development of open solutions
for software packages (Smets-Solanes, 2000). This right for re-
compilation is in fact . . . an incentive for developers to publish
interface-related information; to move towards inter-operable stan-
dards; and to give positive and appropriate answers to demands
from individual users (idem).
9
See DOJ versus Microsoft: nding of facts. Available at
http://ftc.gov.
trative of all of the changes we analyse.
10
A real (or
at least a partial) privatisation of academic research in
molecular biology has been triggered. From the rst
steps (patenting of genetic engineering methods) to
the latest ones (EST patenting), these changes have
been carried out with a view towards transferring (via
exclusive licensing) many decisive elements in cur-
rent basic molecular biology research programs into
the hands of private rms, often through joint ventures
with academic teams under the specic provisions in-
troduced by the BayhDole Act.
5.1. Some of the conditions that have lead to a
change in regime
To fully understand the nature of the changes that
have taken place in this area, we must refer to the
Common Law tradition that prevails in the Amer-
ican legal system. Applied to Patent Law and more
specically to the eld of living entities that we are ex-
amining here, the American version of Common Law
presents two distinguishing features.
(i) In the absence of any texts with explicit refer-
ences to the limits of patentability as applied to
living entities, American jurisprudence has made a
tacit distinction between products of nature and
non-naturally occurring manufactures or compo-
sitions of matter (a distinction that is nowhere to
be found in Civil Patent Law). The US Congress
has, therefore, been able to declare that anything
under the sun made by man can be patented
(Congress, second session, 5, 1952).
(ii) Crucial to all American doctrine is the concept
of utility, which can be applied to any type of
invention or discovery. Patents are explicitly
granted because they are deemed to be useful
(Utility Patent) for societal progress. This is
because, as pointed out by Eisenberg (1995), US
Law states the term invention means invention
or discovery (c.f. Article 100a). This type of
equivalency is nowhere to be found in the Conti-
nental European tradition, where the basic prin-
ciple underlying the entire doctrine of patenting
is the distinction between discovery (as applied
to the production of knowledge) and inventions
(i.e. technical devices enabling an exploitation of
10
This section is indebted to Orsi (2001).
1498 B. Coriat, F. Orsi / Research Policy 31 (2002) 14911507
knowledge) (see on this point the Article 52a of
the Convention on European).
Having claried the peculiarities that typify the doc-
trinal foundations of current jurisprudence, we can
reconstitute the history of the regime change, and
show how this brought about the patentability of liv-
ing organismsand ultimately of human genes. This
shift involved the three following phases:
5.2. 19711980: The US Supreme Courts
Chakrabarty ruling and the inclusion of single cell
living organisms into the domain of patentability
Following a long drawn-out judicial procedure, (that
began in 1971) the Supreme Court, in 1980, nally
granted General Electric a patent for a genetically
modied micro-organism that was able to absorb ma-
rine pollution.
By so doing, the Supreme Court was overturning
the USPTOs initial decision. Its ruling was that gene-
tically engineered micro-organisms are statutorily
covered by 35 USC 101 as a non naturally occurring
manufacture or composition of matter (Jaenischen,
1995).
Another signicant event occurred in the wake of
this ruling. In 1980, Stanford University requested
and was awarded a patent for a DNA recombination
technique involving the use of genetic engineering to
transplant a gene from one living entity into another.
This meant that a process for producing biologically
functional molecular chimeras (Stanford Universitys
claim in its patent application) had now entered the
domain of patentability. Such a process, the epitome of
a scientic knowledge production vehicle, was based
on a new knowledge in genetic engineeringone that
could not have been patented before the Chakrabarty
ruling.
For all of these reasons, the domain of patentabil-
ity opened up to new biotechnological processes that
allowed for the production of transgenic animals (or
plants) which can be dened as pure research tools
and used for scientic experimentation.
5.3. The patentability of multicellular organisms and
the USPTOs new doctrine
In 1987, another threshold was crossed when the
USPTO ofcially recognised the changes that rul-
ings by the Supreme Court and by various Courts of
Appeal had provoked. In a famous public statement
(which some observers consider to be historic),
the agency let it be known that the USPTO now
considers non-naturally non-human multicellular liv-
ing organisms, including animals, to be patentable
(USPTO, 1987). The statement had immediate and
explicit consequences: as early as 1988, a patent was
awarded for the invention of a genetically modied
mammal, the so-called oncomouse/Harvard. This
was a precursor for many patents that have been
granted since then, covering a whole range of trans-
genic animals created by different laboratories.
The signicance of all of these changes is that
the eld of patents was now open to any biologi-
cal material that required human interventions. Ac-
cording to the Supreme Court and the USPTO, the
non-natural aspect of such inventions stems from
their man-made attributes, even where the proper-
ties they reveal are natural ones.
This conrms the idea of equivalency, in the US
doctrine between discovery and invention.
5.4. 1991: The NIHs registration of a patent on
partial DNA sequences (ESTs); conict with the
HGP; and renewed discussions on the patentability
of human genes
The sum-up of this trend was the NIHs 1991 ap-
plication for a patent protection to cover partial gene
sequences (so-called ESTs).
This application took the trends logic to an ex-
treme, inasmuch as it covered sequences that were
only partial. The NIHs could not have been unaware
that it would be impossible to satisfy the normal statu-
tory pre-conditions for patenting, i.e. to demonstrate
the utility of such sequences. This is undoubtedly why
the application would allege that such sequences do
indeed contain a modicum of patent-related utility, in
that despite their lack of identiable functions they can
help to develop knowledge of the genetic foundations
of health, disease and biological functions(quoted in
Schrecker et al. (1996)). In other words, the NIHs ar-
gument was that these partial sequences had a utility
dimension since they could conceivably contribute to
a future progress of knowledge by helping to identify
those genes that are implicated in certain diseases (and
by discovering new therapeutic targets).
B. Coriat, F. Orsi / Research Policy 31 (2002) 14911507 1499
Here it is interesting to note that the USPTO re-
jected the NIHs claim, but only because in its view
further work (was) needed to establish the utility of
the claimed object.
The NIHs patent application provoked a real crisis
in the international open science community. The idea
that knowledge becomes a market commodity once
State authorities are prepared to award a patent for it,
completely contradicts the mindset that had presided
over the implementation and the functioning of the
Human Genome Program (HGP). Remember that the
HGP is an international academic program which is
built on an open science model. Launched in 1988 at
the behest of the NIHs and the DoE to enhance the
sequencing of human genes, the HGPs basic rule is
the free circulation of knowledge (NRC, 1988; OTA,
1988). Designed to avoid duplications and to pro-
mote collaboration within the scientic community,
its core activity involves the constitution of databases
containing the partial DNA sequences that the HGP
teams have identied and which are made available to
researchers for free (OCDE, 1995). A 1998 USPTO
decision to grant Incyte Pharmaceuticals a patent for
partial sequences (involving the identication and
coding of some of the proteins expressed in various
cells and human tissues) will lead to even further
controversy inasmuch as it conrms a new dimension
in this extension of the area of patentability (Patent
5,817,479).
As a result of these new circumstances, many nd-
ings from the basic research that is being carried out
in this eld now come under the proviso of bilateral
monopolies. Thus, the famous Harvard Mouse, in
principle nothing more than a cancer research tool and
once covered by a patent, was handed over to Dupont
Corporation as part of an exclusive licensing arrange-
ment. The best-known example in this area is the
breast and ovarian cancer gene (BRCA1 gene) that was
jointly granted to the University of Utah, to NIH and
to a rm called Myriad Genetics, which enjoys exclu-
sive rights to the exploitation of all of the benets that
can be derived from diagnosing this gene (and from re-
lated therapy). This is a prime example of knowledge
being turned into a commodity. It has brought imme-
diate economic prots to those actors who hold these
new property rights. Along the same lines, the patent
that Stanford University was awarded for its DNA re-
combination technique (which has been licensed to a
large number of institutions) turned out be one of the
most protable patents of the entire 1980s (Mowery
et al., 1999). This patent is at the origin of one of Stan-
ford Universitys two largest licensing programs (for
more on this topic, see Burns and Sandelin (1997)).
However, important the immediate gains have been
for the rms and other for-prot institutions that enjoy
the benets of this new IPR, this is only one aspect
of the economic effects that have been produced by
the changes in the IPR system. To carry out a more
exhaustive evaluation of such effects, we should con-
sider another eld of analysis, namely those changes
that have taken place in the nancial sphere.
6. A distinctive feature of the new regime: the
new key role played by nancial markets
6.1. Institutional complementarities: the connection
between the new IPR provisions and changes in
nancial regulations
Alongside the changes that the BayhDole Act in-
troduced, another batch of new regulations were in-
troduced. Their purpose was to encourage the entry
of venture capital into the new hi-tech rms that were
coming out of the research sector. At least two of the
nancial regulatory changes are worthy of mention:
(i) those that allow pension funds to invest in venture
capital rms and to take stakes in risky companies
listed on the Nasdaq; (ii) those that brought about the
Nasdaqs transformation from a market (which had
been created in 1971 as an automated over-the-counter
price quotation system), to a stock market that is spe-
cialised in innovative rms.
Here, it is paramount to note that it would have
been impossible to set up a market dedicated to the
launching of new innovative but loss-making rms,
had a whole series of statutory changes not taken place.
The main steps of this statutory change process can
be presented as follows.
11
The rst phase revolves around the equity markets
regulatory barriers to entry for innovative but risky
rms. As pointed out by Gompers and Lerner (1998),
these restrictions were replaced by the new ERISA
pension fund regulations. Introduced in 1974 and
11
This paragraph is largely based on Orsi (2001).
1500 B. Coriat, F. Orsi / Research Policy 31 (2002) 14911507
amended in 1979, the new regulations modied the
prudential rule, enabling pension funds to make major
investments in new and innovative (but unprotable)
and risky companies. Pension funds were allowed
. . . to invest substantial proportions of their portfo-
lios in corporate equities and other risky securities. . .
rather than just in high-grade corporate and govern-
ment securities (Lazonick and OSullivan, in press).
This changed both the supply of capital to these mar-
kets as well as their level of liquiditymaking it
possible to nance (through venture capital compa-
nies that have come to be widely dominated by the
pension funds) a whole range of new rms that would
otherwise have never found enough funding.
This caused a crisis throughout the venture capital
industry in the mid-1980s, partly due to the excess liq-
uidity the pension funds were injecting into the system
(Janhson, 1984). So many start-up IPOs were being
funded by venture capitalists that the markets OTC
section was unable to absorb them. Nor could they be
directly sold to the more established rms. Ultimately,
this meant that the venture capitalists were being
cut off from their traditional exit options (Gompers,
1996).
At the same time, the SEC (in a joint effort with
the NASD
12
) initiated a change in the Nasdaqs status.
The new regulations authorised an initial and contin-
uous listing on the Nasdaq of rms that had recorded
losses for several years in a row. One consequence was
that the Nasdaq, unlike traditional stock exchanges
such as the AMEX and the NYSE, was alone able
to apply the so-called Alternative 2 system (NASD,
1984), wherein non-protable rms can be listed (and
oated via IPOs) as long as they respect a number
of specic criteria. Moreover, these unprotable rms
were allowed to include a whole range of intangible
assets in their nancial statements, the most important
ones being their portfolio of patents and other IPR.
13
In this way, a new exit option was opened for ven-
ture capital rms, inasmuch as a much higher num-
ber of new start-ups could now be launched on the
Nasdaq.
12
National Association of Security Dealers: the entity in charge
of Nasdaq regulations (under the supervision of the SEC).
13
As stated by the new regulations underlying Alternative 2:
net tangible assets shall mean total asset including the value
of patents copyrights and trademarks but excluding the value of
goodwill less total liabilities (Series Rules 4200 denition 28).
Such modications of the nancial regulatory
framework served to complement the changes that
had been affecting the IPR regime. By so doing, they
created a series of institutional complementarities
(Aoki, 2000). Conditions were, therefore, set up dur-
ing the 1980s enabling the otation of companies
that were to be initially funded by venture capitalists
(and often founded as joint ventures with universities
and public labs) before being promoted via Nasdaq
IPOs. In many cases, such rms main assets were
IPR-based. This model, which was very success-
ful for Genentech, would later serve as a benchmark
for promoting the launch of a number of biotech
companies.
14
Another very successful model at that
time was the one that was applied to the Internet
rms, based as it was on virtual clients, with the
companies value being determined by the number of
web pages visited.
6.2. From IPR to the nancial markets: towards a
nance-driven model of innovation
If we look at the example of biotech rms, it is
noteworthy that most of them (those that come on
the scene in the late 1980s and early 1990s) were
made up of research teams coming out of public sec-
tor laboratories (universities, NIH, etc.), usually under
the scientic supervision of star scientists (Zucker
et al., 1998). Table 2 below, which covers the whole of
the biotech sector, highlights the relative weakness of
such rms income growth rates (earnings having risen
from US$ 11.5 to 18.8 billion) when compared with
the rise in their market capitalisation (which jumped
from US$ 52 to $97 billion). Above all, this table
shows that the sector as a whole has been making
losses for a long time, with net losses having risen from
US$ 2 billion (over 19961999) to US$ 3.1 billion in
1999.
14
We should remember that Genentech, the rst US biotech rm
to be listed, was launched on the OTC market in 1980, just 3
months after the Chakrabarty ruling. This IPO is considered to be
one of the most spectacular in recent history, even though at the
time the rm did not have a single product to sell. Founded by
Pr Boyer (co-owner of the rDNA patent technique) and a venture
capitalist (Mr. Swanson), the rm specialized exclusively in basic
research. The success of its IPO convinced the investor community
of the potential value of rms that are based on this type of model
(more on this in Orsi (2001)).
B. Coriat, F. Orsi / Research Policy 31 (2002) 14911507 1501
Table 2
Biotech highlights 19961999 (US$ billion)
1999 1998 1997 1996
Product sales 13.6 12 10.6 8.9
Revenues 18.8 16.6 14 11.5
R&D expenses 6.9 6.7 5.6 4.6
Net loss 3.1 1.9 1.8 2.2
Market capitalisation 97 93 83 52
Number of companies 327 317 294 260
Employees 114000 106000 94000 73000
Source: Ernst and Young (1998, 1999).
Given the sectors lack of protability and the rel-
atively slow growth in its product sales and revenues,
development would appear to be highly dependent
on the way in which it is evaluated by the investor
community and on intangible resources, such as
IPR. As stated by the Biotechnology Industry Or-
ganisation (one of the sectors more inuential trade
associations), there is a critical synergy between
the biotechnology industry and intellectual property
protection. . . . Patents give investors condence and
inuence their willingness to put their capital at risk.
Based on this argument, the organisation has con-
cluded, let there be no mistake, patents are very
important to securing capitalvery important to our
very viability! (BIO, 1994).
15
This relationship between IPR and market cap-
italisation, which lies at the heart of the sectors
dynamics, has been analysed by a number of ob-
servers, notably by Austin (1992, 1993) who tested
this relationship in two econometric studies where he
focused on correlations between the date a patent
registration is announced in the press (Wall Street
Journal) and changes in a rms stock price. The
author concluded that the strongest result. . . is that
the patents announced in the press are indeed highly
valued when they issue (Austin, 1993, p. 256) and
came up with two specications relating to this point:
recorded values are higher when the announcement
relates to the patent having actually been granted (as
opposed to a mere attempt to register an invention)
and when it is a broad rather than a narrow patent
(Austin, 1992, 1993). In addition, Austin shows that
15
These quotes come from a contribution made by the BIO the
17 October 1994 hearing of the USPTO (held in San Diego, CA).
when an important patent is granted, the net value of
the entire industry appears to rise.
16
This overall situation in the biotech sector (particu-
larly for its subgroup of genomic rms) has lead to a
highly strategic game in which institutional investors
try to ensure the patents commercial promotion, thus
underpinning and enhancing their securities market
value. Market valuation becomes increasingly impor-
tant inasmuch as these rms, which do not pay out any
dividends, can only reward shareholders through cap-
ital gains. This explains the stock markets extraordi-
nary volatility, a situation that over the past few years
has caused a asset bubble to formand to burst. By leav-
ing genomics to one side (their extraordinary volatil-
ity is illustrated in Fig. 1) and comparing changes in
biotech company valuations, on one hand, and in the
Nasdaq index, on the other, a number of observations
arise. From October 1998 (when the Nasdaq hit its
low for the period under consideration) to early March
2000 (when it hit its high), the Nasdaq Index rose from
1419 (on 8 October 1998) to 4897 (on 7 March 2000),
a jump of 345%. The biotechnology index experienced
on the other hand a relatively greater increase than the
composite index did. Over the period under study, the
Nasdaq biotechnology index (NBI) jumped 527% (ris-
ing from 285 on 8 October 1998 to 1505 on 7 March
2000). In both cases the indexes skyrocketed starting
in late 1999, when the bubble began.
If we compare the two indices trend reversals be-
tween January and March 2001, we can see that the
Nasdaq composite dropped by 25% and the NBI by
35%.
Even though the Biotech index subsequently re-
covered (without returning to its 1Q 2000 high), the
major and sudden leaps upwards (+527%) and then
downwards (35% off the high) during the period un-
der study clearly attest to the way in which the biotech
sector, as a whole, moved hand in hand with the
16
Campart and Pster (in press) provide other indications of
how sensitive the nancial markets are to patent announcements.
Based on a panel of 158 patent-related litigation announcements
(REUTERS new services) in the biopharmaceutical sector, the au-
thor establishes a series of correlations between such announce-
ments (the litigation itself) and changes in the market capital-
isation of the rms involved. The latter (apprehended over the
5 days following the announcement) moves clearly downwards
when a patent dispute is announced and rises in case the ruling
is favourable to the rm whose patent had come under attack.
1502 B. Coriat, F. Orsi / Research Policy 31 (2002) 14911507
Fig. 1. Comparing changes in the Nasdaq composite, in the Nasdaq Biotech Index and in two of the main genomic rms. NBI: Nasdaq
Biotechnology Index; INCY: Incyte Pharmaceuticals; HGSI: Human Genome Sciences. INCY and HGSI are given here as illustrations.
The same exercise for the other main genomic rms gives analogous results. Source: Orsi (2001), compiled by the author on the basis of
Nasdaq data.
Nasdaq bubble. In fact, both going up and coming
down, it moved even more than the Nasdaq did as a
whole.
The situation with ICT is more complicated, due to
the greater diversity of factors involved. Moreover, it
is not an IPR trade that prevails as such (as is the case
for numerous biotech rms). Instead it is companies
strategic utilisation of extended and reinforced prop-
erty rights. We can, however, make two observations
about the two basic situations in this domain.
(i) Together with the benets of market externali-
ties, the awarding of strong patents for computer
Table 3
Estimates of patents on computer software by companies in 1998
(based on sample of 3336 patents)
Companies No. of
patents
Companies No. of
patents
IBM 1200 Hewlett-Packard 260
Motorola 360 Sony 250
Fujitsu 330 Hitachi 250
Canon 330 Xerox/Fuji Xerox 240
Microsoft 310 Mitsubishi 240
Lucent/BellCore 300 Intel 230
NEC 280 Toshiba 220
Sun Microsystem 260
Source: Aharonian, http://Ipf.ai.mit.edu/Patent/inps-19981018.text.
B. Coriat, F. Orsi / Research Policy 31 (2002) 14911507 1503
Table 4
Estimates of patents on business models
Ranking 19771989 (13-year span) 19901994 (5-year span) 19951999 (5-year span)
1 PitneyBowes 134 PitneyBowes 47 PitneyBowes 77
2 Sharp Corporation 39 IBM 32 Fujitsu LTD 64
3 Omron Electronics 31 Hitachi 23 IBM 58
4 IBM 26 Sharp 11 NCR 30
5 Casio 21 Omron 9 Hitachi 27
6 Tokyo Electric 21 Alcatel Business System
a
9 Citibank 22
7 Hitachi 10 NCR 6 EDS
a
21
8 NCR 7 AT&T
a
6 Microsoft
a
20
9 Toshiba 6 Unisys
a
6 Neopost
a
16
10 Merrill Lynch 5 Casio 5 Matsushita Electric Industrial
a
16
Attalla Technovations 5 Frama A.G.
a
5
Source: USPTO (2001a,b).
a
Indicates a new assignee from previous period.
programs has often strengthened the position of
large incumbent rms. The aforementioned ex-
ample of Microsoft provides an illustration of
these processes. More generally, it should be
noted that large incumbent rms usually engage
in cross-licensing activities within patent pools
(Merges, 1999) that are designed to protect them
from the risk of exposure to hold-ups (Shapiro,
2001). This allows them to prosper by developing
their own products.
(ii) At the other extreme of the spectrum, the new
patents that have been granted to computer pro-
grams and/or business models (whose number
soared from about 4000 in 19921993 to nearly
40,000 patents in 1998)
17
have often facilitated
the launching of small specialised rms that oper-
ate in specic market niches. Venture capitalists
will be especially prepared to work with such
rms when the greater the chance that they will
be taken over at a later date by large rms and
if the innovations that these start-ups have origi-
nated are protected by patents or by copyright.
Different situations obviously co-exist. Note, how-
ever, the traditional software developers dominance,
as well as the impressive speed with which the big
new entrants have been able to become market lead-
ers. For instance, Microsoft, ranked 24th in 1995 with
only 39 software patents applications, occupied three
years later rank 5, with 310 applications during 1998
alone (Tables 3 and 4).
17
See http://Ipf.ai.mit.edu/patent/inps-19981018.text.
In this eld as well, the situation has lead to a
number of highly strategic games having been played.
As pointed out in recent studies, it seems that most
of the patents that the bigger rms have been reg-
istering are not meant to protect inventions. Instead
they are supposed to hinder virtual rivals, or create
strong bargaining positionssee Cohen et al. (2002),
who conclude their very detailed statistical analysis
by saying that . . . the most prominent motives for
patenting include the prevention of rivals from patent-
ing related inventions (i.e. patent blocking), the use
of patents in negotiations and the prevention of suits
(Cohen et al., 2002, p. 1). In the same vein, Hall
and Ham conclude in a survey dedicated to patenting
in the semiconductor industry that our preliminary
evidence suggests that the pro-patent shift in the
1980s has altered the patent strategy of semiconductor
rms. . . . On the one hand, stronger patent rights may
have well facilitated specialisation in the industry. . . .
On the other hand, such positive effects are countered
by a socially inefcient process whereby rms amass
vast patent portfolios simply as bargaining chips. In
essence, a patent portfolio race may ensue (Hall
and Ham, 1999, p. 24).
7. Conclusion: an initial assessment and
evaluation of the new IPR regime
The many changes that the present article has dis-
cussed are a topic of widespread analysis and debate
nowadays.
1504 B. Coriat, F. Orsi / Research Policy 31 (2002) 14911507
At rst glance, the new policies the American
authorities and Courts have been deploying in or-
der to enforce the new IPR regime would appear to
have been successful. In some areas (semiconduc-
tors and computer software in particular) American
rms who had been overtaken by their Asian ri-
vals during the 1980s were market leaders again.
More signicant is the fact that many new rms
have entered the market. The areas we have studied
(biotech, genetics, semiconductors, computer soft-
ware, etc.) were characterised throughout the 1990s
by the proliferation of companies of all different
sizes.
However, despite such ostensible successes, the new
regime does not appear to have stabilised. There has
been a great deal of tension in certain areas and this
has raised questions about the future. Two points are
particularly salient at this juncture and we would like
to nish this article by focusing on those issues that
remain unanswered.
7.1. Tensions arising from the extension of
patentability to previously excluded areas and from
the relaxation of the traditional criteria
First of all, remember that the patenting of hu-
man genes has raised serious ethical problems in
the eld of life sciences (c.f. the 1996 debate that
raged throughout the European Academies of Sci-
ences). The international community remains strongly
divided on this point. Opponents to the new doc-
trine are particularly incensed because it does not
seem to offer the sorts of guarantees that knowl-
edge production requires, in terms of the long-term
innovation process and the social costs that this
infers.
As such, and even without taking any ethical con-
siderations into account, some pharmaceutical rms
who have been actively advocating the patentability of
ESTs and genes (and who have helped to fund numer-
ous companies in this eld) have often at the same time
openly expressed doubts about the processs long-term
sustainability. Given the delays and risks associated
with research activities in this area, they are afraid that
they will no longer be able to undertake such long and
risky ventures if they have to pay royalties in order
to access basic upstream knowledge. According to
Heller and Eisenberg, this is a typical anti-commons
tragedy.
18
The authors observe that the privatisa-
tion of biomedical research must be more carefully
deployed to sustain both upstream research and down-
stream product development. Otherwise more intellec-
tual property rights paradoxically may lead to fewer
useful products for improving human health (Heller
and Eisenberg, 1998). What is at stake here is the
principle of granting patents to basic or upstream
research (along these lines, apart from Eisenbergs
arguments, see also Rais view on the dangers of
patenting upstream research in biopharmaceuticals
(Rai, 2001)).
Regarding computer programs and business mod-
els, even though the ethical dimension is absent (or
certainly less visible), some of the economic prob-
lems involved in the patentability of algorithms are
akin to those that are involved in gene patentabil-
ity. Remember that a simple computer program uses
dozens of algorithms. As such, if property conicts
arise between the rms who use these algorithms,
many of the actors (beginning with those who work
on the Internet) would come under threat and the
whole process of innovation could be impeded. Typ-
ically this might generate a situation such as the one
that Shapiro (2001) analysed, with the creation of a
patent thicket.
At a theoretical level, no truly novel argument has
been made to supplement Kitchs old plea in favour
of large prospects being handed to rms by means
of extremely broad-based patents (Kitch, 1977). Nor
has any new empirical study contradicted Merges
and Nelsons (1990) response to Kitchs views. Quite
the contrary, recent theorisation in this eld has es-
tablished that wherever sequential innovation takes
place, an overly generous granting of patents can
strongly hinder the innovation process (Hunt, 1999b;
Bessen and Maskin, 2000). This argument has also
been endorsed by some of the most innovative soft-
ware developers around, i.e. Oracle or Adobe man-
agers during the public hearings that the USPTO
18
According to the authors, the argument is as follows: the
tragedy of commons metaphor helps to explain why people
overuse shared resources. However, the recent proliferation of in-
tellectual property rights in biomedical research suggests a dif-
ferent tragedy, an anticommons one in which people under-use
scarce resources because too many owners can block each other?
(Heller and Eisenberg, 1998).
B. Coriat, F. Orsi / Research Policy 31 (2002) 14911507 1505
held at the San Jose Convention Centre in 1994 (c.f.
http://lpf.ai.mit.edu/patents/).
Finally, most observers have concluded that the ex-
tension of patents into new elds poses a number of
future threats and uncertainties, yet does not provide
any unassailably persuasive argument in favour of di-
luting the rules of open science.
7.2. Is a nance-driven innovation model a
sustainable one? The recent bursting of the Nasdaqs
speculative bubbleand the meaning thereof
We have shown that one of the key changes that took
place during the 1980s was the new institutional com-
plementarities that gave rise to an alliance between
the nancial markets and the new innovative rms that
were granted new types of patents.
19
To a large extent the so-called new economy is
grounded and rooted in this new alliance. From this
point of view, no one can deny that the new comple-
mentarities that have taken root in the US NIS have
had remarkable effects. In particular, the Nasdaq
has turned out to be a powerful catalyst, amplify-
ing the changes that were introduced in the US NIS
during the 1980s and encouraging the rise of many
new rmsspecically in the new R&D intensive
sectors.
It remains that the year 2000 marked a turning
point. The bursting of the stock markets nancial
bubble lead to a succession of bankruptcies, rings
and dramatic readjustments. Many of the new stars
of the 1990s (particularly some of the Internet rms)
sawtheir accumulated share value drop dramatically.
20
The same applied to a number of ICT rms. Lastly,
if one looks at the gures, it is clear that the entire
biotech went through a major upheaval (without men-
tioning the genomic rms, who experienced an even
rockier ride (Fig. 1).
Even if a number of factors can be used to explain
the creation and subsequent bursting of the Nasdaq
bubble (given that the new relationships between
IPRs and venture capital only constitute one of
19
Firms constantly recycle this argument when talking about
venture capital (i.e. software editors explaining why they defend
the idea of software patentability). On this subject read Herings
(op. cit.), which the USPTO organised in San Jose in 1994.
20
This question is now well documented. For a recent very
detailed study see Ofek (2001).
several explanations for this bubble), the instability
that will characterise this market going forward means
that there should be a renewed questioning of the
long-term sustainability of the nance-driven innova-
tion model that these recent changes have helped to
set up.
Clearly further studies will need to be made in this
eld. Still, the present article will have achieved its
purpose if it casts some light on the highly complex
and contradictory phenomena that were at work in the
recent changes of the US NIS.
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