Examples of smart regulation – not deregulation

The White House recently released its preliminary review of regulations, targeting those which are “obsolete, unnecessary, unjustified, excessively burdensome, or counterproductive.” Most of the examples cited are just that — regulations that are no longer needed. These include EPA vapor trap filters on gas pumps that are now installed on cars and Treasury regulations concerning sanctions on Yugoslavia. They also include processes that could be streamline, such as DOE using a consistent way of indicating confidential data in all of its loan and grant applications.
But there are other who are using the regulatory review to upgrade and modernize the regulations. In an earlier posting, I mentioned how the Interior Department was using the review process to set a unified fee schedule for commercial filming and still photography on public land — thereby bettering manage their intangible assets. HUD is updating their property standards to incorporate green building techniques and energy-efficiency standards for projects financed by the HOME Investment Partnerships (HOME) Program.
Here is another example of changing regulations to cope with new circumstances from the Agriculture Department:

As part of the USDA “Know Your Farmer, Know Your Food” effort to create new economic opportunities by better connecting consumers with local producers, FSIS [Food Safety and Inspection Service] worked with small and medium processors to reduce the complexity of regulations for approving mobile slaughter units under Federal regulations. A mobile slaughter unit is a self-contained slaughter facility that can travel from site to site. These units can help producers meet consumer demand for locally grown and specialty products and can serve multiple small producers in areas where slaughter services might be unaffordable or otherwise unavailable. In general, approval of a mobile slaughter facility required a great deal of stakeholder involvement, creative thinking, and problem solving, because the Federal regulations are based on fixed slaughter facilities. Traditionally, animals intended for sale as food have been transported to an inspected facility for slaughter and processing. For livestock producers in rural areas throughout the country, they were finding it difficult, even cost prohibitive, to transport their livestock long distances to the closest inspected slaughter facility. As a result, regulations based on a fixed location were proving to be a barrier to many small processers from servicing the needs of small producers. In response to these concerns, FSIS engaged its stakeholders to develop guidelines providing solutions to the unique concerns that may arise with mobile slaughter units. Under the new guidelines developed by FSIS, small processers can more easily take advantages of mobile slaughter, which include lower processing costs, reduced stress on animals, lower capital investment, and less resistance from municipalities and neighbors.

A great example of the need for smart regulations. No one would want slaughter houses to be deregulated — for obvious reasons of public health. The trick is to re-craft the regulations to fit the new circumstances. In this case, the new circumstance is the shift from the centralized, industrial age meat processing facilities to a more localized, decentralized production process. Kudos to the Agriculture Department for understanding and responding to the shift.

More on protecting and utilizing government intangibles

This from the Department of the Interior’s Regulatory Review Plan:

Commercial Filming on Public Land Rules – This joint effort between the National Park Service (NPS), Fish and Wildlife Service (FWS), Bureau of Land Management (BLM), Bureau of Reclamation (BOR) and Bureau of Indian Affairs (BIA) will create consistent regulations and a unified fee schedule for commercial filming and still photography on public land. It will provide the commercial filming industry with a predictable fee for using federal lands, while earning the government a fair return for the use of that land.

Clearly the agencies know that protecting and utilizing their intangible assets is important. What is not clear is whether there is a consistent policy and strategy in place to do so. Efforts such as this by Interior should not have to be part of a regulatory review process — but a government-wide management process.

Protecting government's intangible assets

You may have heard this story. Shortly after the Navy SEAL Team 6 raid that killed bin Laden, Disney moved to copyright the label “SEAL Team 6.” Now comes word that Disney has backed off. As the Wall Street Journal reports, the Navy took an aggressive stance:

The Navy first fired back at Disney with its own filings for trademarks on the phrases ‘SEAL Team’ and ‘Navy SEALs,’ on May 13, several days after Disney’s application. Those terms denote “membership in an organization of the Department of the Navy that develops and executes military missions involving special operations strategy, doctrine, and tactics,” the Navy said in its filings. The Navy had a beachhead with its longstanding trademark on “SEALs,” which it has licensed for videogames, among other products.
“We are fully committed to protecting our trademark rights,” said Commander Danny Hernandez, the chief Navy spokesman.
A Disney spokesman said the company was withdrawing the applications “out of deference to the Navy.”

This incident raises a much larger issue. What is the policy of the US government toward managing its intangible assets? As far as I can tell, that policy is episodic. For example, as the story noted, the Navy has already licensed the trademark “SEALs” for videogames. FBI and others license their trademarks as well. But there does not seem to be a government wide policy. On the other hand, CBS has filed to trademark “NCIS” – based on its popular TV show about the Naval Criminal Investigation Service.
There is an alternative model to managing government intangible assets. In 2007, the French government created the Agence du patrimoine immatériel de l’État (APIE) — the Agency for Public Intangibles of France. APIE’s role is to work with other government ministries to leverage their intangible assets. They help with areas ranging from branding and trademarks to the reuse of government information.
In the US, we tend to put these functions in different silos and basically leave it up to the agencies to figure out what to do. So we have a technology transfer policy dealing with government owned patenting, an information policy dealing with the use of government generated data, and a non-well understood de-facto trademark policy. All of which operated with conflicting goals and objectives. No where do we take a coherent view of these area as government assets.
Maybe we should. The Navy SEALs trademark case is a prime example of why.

UK review of IP and growth

Last week, the UK Intellectual Property Office released its new independent review of IP — Digital Opportunity: A review of Intellectual Property and Growth. Called the Hargreaves Report (after the chair of the review committee and lead author Professor Ian Hargreaves), this report is a follow on to an earlier report in 2006, the Gowers Review of Intellectual Property.
I especially like the introductory part of the report, where the author notes that investments in intangible assets exceeds investment in tangibles assets in the UK (and has since 1992). The introduction also touches upon new issues beyond the standard discussion of “how the digital economy changes everything” that we have been hearing about for over two decades. One newer areas included in the report is the rise of new models of innovation, especially in the service industries. I wish this theme had be examined in greater detail, as I believe the more collaborative models present a major challenge to our old industrial era notions of intellectual property rights.
The report does make a strong statement on the role of IPR:

Intellectual Property Rights (IPRs) support growth by promoting innovation through the offer of a temporary monopoly to creators and inventors. But such rights can also stifle growth where transaction costs are high or rights are fragmented in a way that makes them hard to access. Poorly designed IP rules can help established players in a market obstruct new players by impeding their access to technology and content. A carefully designed and dynamic IP system can, by contrast, complement the spur which competition gives to innovation by enabling follow on-innovation.

I believe that this is a good foundational description of the challenge facing an intellectual property system.
The Hargreaves Report contains a number of specific recommendations, heavy on copyright but also addressing the patent thicket issue and the needs of SMEs:

1. Evidence. Government should ensure that development of the IP System is driven as far as possible by objective evidence. Policy should balance measurable economic objectives against social goals and potential benefits for rights holders against impacts on consumers and other interests. These concerns will be of particular importance in assessing future claims to extend rights or in determining desirable limits to rights.
2. International priorities. The UK should resolutely pursue its international interests in IP, particularly with respect to emerging economies such as China and India, based upon positions grounded in economic evidence. It should attach the highest immediate priority to achieving a unified EU patent court and EU patent system, which promises significant economic benefits to UK business. The UK should work to make the Patent Cooperation Treaty a more effective vehicle for international processing of patent applications.
3. Copyright licensing.
• In order to boost UK firms’ access to transparent, contestable and global digital markets, the UK should establish a cross sectoral Digital Copyright Exchange. Government should appoint a senior figure to oversee its design and implementation by the end of 2012. A range of incentives and disincentives will be needed to encourage rights holders and others to take part. Governance should reflect the interests of participants, working to an agreed code of practice.
• The UK should support moves by the European Commission to establish a framework for cross border copyright licensing, with clear benefits to the UK as a major exporter of copyright works. Collecting societies should be required by law to adopt codes of practice, approved by the IPO and the UK competition authorities, to ensure that they operate in a way that is consistent with the further development of efficient, open markets.
4. Orphan works. The Government should legislate to enable licensing of orphan works. This should establish extended collective licensing for mass licensing of orphan works, and a clearance procedure for use of individual works. In both cases, a work should only be treated as an orphan if it cannot be found by search of the databases involved in the proposed Digital Copyright Exchange.
5. Limits to copyright. Government should firmly resist over regulation of activities which do not prejudice the central objective of copyright, namely the provision of incentives to creators. Government should deliver copyright exceptions at national level to realise all the opportunities within the EU framework, including format shifting, parody, non-commercial research, and library archiving. The UK should also promote at EU level an exception to support text and data analytics. The UK should give a lead at EU level to develop a further copyright exception designed to build into the EU framework adaptability to new technologies. This would be designed to allow uses enabled by technology of works in ways which do not directly trade on the underlying creative and expressive purpose of the work. The Government should also legislate to ensure that these and other copyright exceptions are protected from override by contract.
6. Patent thickets and other obstructions to innovation. In order to limit the effects of these barriers to innovation, the Government should:
• take a leading role in promoting international efforts to cut backlogs and manage the boom in patent applications by further extending “work sharing” with patent offices in other countries;
• work to ensure patents are not extended into sectors, such as non-technical computer programs and business methods, which they do not currently cover, without clear evidence of benefit;
• investigate ways of limiting adverse consequences of patent thickets, including by working with international partners to establish a patent fee structure set by reference to innovation and growth goals rather than solely by reference to patent office running costs. The structure of patent renewal fees might be adjusted to encourage patentees to assess more carefully the value of maintaining lower value patents, so reducing the density of patent thickets.
7. The design industry. The role of IP in supporting this important branch of the creative economy has been neglected. In the next 12 months, the IPO should conduct an evidence based assessment of the relationship between design rights and innovation, with a view to establishing a firmer basis for evaluating policy at the UK and European level. The assessment should include exploration with design interests of whether access to the proposed Digital Copyright Exchange would help creators protect and market their designs and help users better achieve legally compliant access to designs.
8. Enforcement of IP rights. The Government should pursue an integrated approach based upon enforcement, education and, crucially, measures to strengthen and grow legitimate markets in copyright and other IP protected fields. When the enforcement regime set out in the DEA becomes operational next year its impact should be carefully monitored and compared with experience in other countries, in order to provide the insight needed to adjust enforcement mechanisms as market conditions evolve. This is urgent and Ofcom [Office of Communications – the UK’s telecommunications regulator] should not wait until then to establish its benchmarks and begin building data on trends. In order to support rights holders in enforcing their rights the
Government should introduce a small claims track for low monetary value IP claims in the Patents County Court.
9. Small firm access to IP advice. The IPO should draw up plans to improve accessibility of the IP system to smaller companies who will benefit from it. This should involve access to lower cost providers of integrated IP legal and commercial advice.
10. An IP system responsive to change. The IPO should be given the necessary powers and mandate in law to ensure that it focuses on its central task of ensuring that the UK’s IP system promotes innovation and growth through efficient, contestable markets. It should be empowered to issue statutory opinions where these will help clarify copyright law. As an element of improved transparency and adaptability, Government should ensure that by the end of 2013, the IPO publishes an assessment of the impact of those measures advocated in this review which have been accepted by Government.

According to the summary:

The Review’s specific recommendations would support growth of the UK’s increasingly intangibles intensive economy. This requires:
• an efficient digital copyright licensing system, where nothing is unusable because the rights owner cannot be found;
• an approach to exceptions in copyright which encourages successful new digital technology businesses both within and beyond the creative industries;
• a patent system capable of preventing heavy demand for patents causing serious barriers to market entry in critical technologies;
• reliable and affordable advice for smaller companies, to enable them to thrive in the IP
intensive parts of the UK economy;
• refreshed institutional governance of the UK’s IP system which enables it to adapt organically to change in technology and markets.
If the Review’s recommendations are acted upon, the result will be stronger rates of innovation and increased economic growth. An economic impact assessment conducted by the Review team, and of course subject to the high degree of uncertainty inherent in such projections, estimates that this would add between 0.3 per cent and 0.6 per cent to annual GDP growth. The path laid down in this review would also, over time, mean that IP law, including copyright law, would become clearer and be observed by most people without controversy.

There are a lot of specifics here that people could (and will) argue over and debate. The bottom line, however, is that the report has framed that debate in a reasonable fashion. We will see what happens. As Hargreaves points out, “the Gowers Review made 54 recommendations, of which only 25 have been implemented wholly or in part.” I don’t know if Professor Hargreaves will have a higher implementation rate.

Happiness as the ultimate intangible asset

The Organization for Economic Cooperation and Development — commonly known by its acronym OECD — is celebrating its 50th anniversary. As part of that celebration, they have adopted a new tag line to explain who they are and what they do: “Better Policies for Better Lives.”
As part of “better policies,” OECD co-sponsored a conference with Athena Alliance last week on intangibles and economic growth: “New Building Blocks for Jobs and Economic Growth” (see earlier posting). That conference helped chart the direction for policy and research activities. (More later once I get the report written.) And of course, OECD has numerous other activities connected with better policies in a wide range of areas.
At the other end of the tag line, OECD also has started a Better Life Initiative. The purpose of the initiative is to see how and whether lives are getting “better.” What is the measure of well-being and progress? They have just released their Better Life Index. This is not the standard set of indicators. Rather it allows individuals to assess their own well-being based on what is important to them and then see how nations rank on those preferences. The idea is to build a bottom up assessment of what is important. That data will later be tied to policy analysis in their long term project on “How’s Life?”
A very interesting project — one that we will be keeping an eye on.

Cheap 3D printing?

Over the years, I’ve posted a number of peices pieces on 3D printing as an emerging manufacturing technology. Here is an item from Gizmag — Prototype miniature 3D printer could become an affordable product. Researchers at the Vienna University of Technology have created a printer that costs under $2000. According to the story on of the uses might be for “physicians who wish to build custom medical devices.”
As I said in my previous posting on the subject:

I can foresee a broader use for creating customized medical devices, such as replacement joints. One of the most time consuming part of hip replacement, for example, is the fitting of the joint inside the body. It needs to be done just right. A customized joint, 3D printed on site based on the patience’s exact body specifications, might simplify the process.

Maybe the future will be here a lot quicker. On the other hand, there are still a lot of social/political issues to be confronted — specifically on how to insure that the custom medical device that someone wants to stick inside your body is safe and actually works. We may very well need a great deal of social and organizational innovation before we can full utilize this technological innovation.

Crafting an asset-based privacy policy

In a number of previous posts, I’ve made the point that we need to treat personal data as an intangible assets. Now, that same point is being made by others — including Professor Alex (Sandy) Pentland at the MIT Media Lab. He was recently quoted as commenting that “Your data becomes a new asset class, you have more control over the information, and it becomes your most lucrative asset.”
I understand that Professor Pentland is working with groups to craft policies treat personal information as an asset. I will report back later on where these efforts stand.

Bernanke speech at Athena conference

I’m just coming up for air after our big conference on intangibles and economics: New Building Block for Jobs and Economic Growth (see earlier posting). But I want to get up a copy of Fed Chairman Ben Bernanke’s remarks.
Here are a few teaser quotes:

The topics you will address today and tomorrow, bearing on innovation and intangible capital, are central to understanding how we can best promote robust economic growth in the long run.

Over long spans of time, economic growth and the associated improvements in living standards reflect a number of determinants, including increases in workers’ skills, rates of saving and capital accumulation, and institutional factors ranging from the flexibility of markets to the quality of the legal and regulatory frameworks. However, innovation and technological change are undoubtedly central to the growth process; over the past 200 years or so, innovation, technical advances, and investment in capital goods embodying new technologies have transformed economies around the world. In recent decades, as this audience well knows, advances in semiconductor technology have radically changed many aspects of our lives, from communication to health care. Technological developments further in the past, such as electrification or the internal combustion engine, were equally revolutionary, if not more so. In addition, recent research has highlighted the important role played by intangible capital, such as the knowledge embodied in the workforce, business plans and practices, and brand names. This research suggests that technological progress and the accumulation of intangible capital have together accounted for well over half of the increase in output per hour in the United States during the past several decades.
. . .
In the abstract, economists have identified some persuasive justifications for government policies to promote R&D activities, especially those related to basic research. In practice, we know less than we would like about which policies work best. A reasonable strategy for now may be to continue to use a mix of policies to support R&D while taking pains to encourage diverse and even competing approaches by the scientists and engineers receiving support.
We should also keep in mind that funding R&D activity is only part of what the government can do to foster innovation. As I noted, ensuring a sufficient supply of individuals with science and engineering skills is important for promoting innovation, and this need raises questions about education policy as well as immigration policy. Other key policy issues include the definition and enforcement of intellectual property rights and the setting of technical standards. Finally, as someone who spends a lot of time monitoring the economy, let me put in a plug for more work on finding better ways to measure innovation, R&D activity, and intangible capital. We will be more likely to promote innovative activity if we are able to measure it more effectively and document its role in economic growth.

More later.

New Building Blocks for Jobs and Economic Growth

New Building Blocks for Jobs and Economic Growth
Intangible Assets as Sources of Increased Productivity and Enterprise Value

A conference presented by
OECD, Athena Alliance, The Conference Board, Kauffman Foundation, and US National Academies
hosted by the Georgetown Center for Business and Public Policy

May 16 and 17, 2011
Rafik B. Hariri Building,
Georgetown University, Washington, D.C.

Schedule

Monday May 16:

Introduction
and welcome

(8:45 – 9:00)

What
the conference is all about: Kenan Jarboe, President, Athena Alliance

Opening
remarks and introduction: Richard Boucher, Deputy Sec. General, OECD

Lohrfink Auditorium, 2nd floor

 

Keynote
address
: (9:00 – 9:45)

Ben
Bernanke, Chairman, Board of Governors of the Federal Reserve System

Lohrfink Auditorium, 2nd floor

 

Plenary
roundtable discussion
: (9:45 – 11:15)

Moderator: Jon Spector, CEO, The
Conference Board

Otaviano Canuto,
Vice President, Poverty Reduction and Economic Management Network, World Bank  

Allen
Howell, CEO, Corporate Flight Management

Edward Jung, Chief Technology Officer and Co-Founder of
Intellectual Ventures

Lisa Lynch, Dean, Heller School for Social Policy and
Management, Brandeis University

Carl Shapiro, White House Council of Economic Advisors

David Stafford, COO, Michelin Americas Research Company

Manuel Trajtenberg – Professor and
former Head of Israel’s National Economic Council

Lohrfink Auditorium, 2nd floor

 

Break (11:15 – 11:30)

Coffee available on 1st floor

 

Rapid
briefing rounds
(11:30 – 12:30)

Classrooms 1st floor: 130,
145, 155, 160

Start
of workshop process: participants to go to their “start” room as
assigned. Participants in each workshop will receive a briefing on the topics
to be covered in all the other workshops.

 

Lunch (12:30 – 1:15)

Fisher Colloquium, 4th floor

 

Working
group sessions #1
(1:15 – 4:15)

·        
Global Competition
and Collaboration

·        
Boosting
Competitiveness, Jobs and Growth

·        
Emerging Measures for
Strategic Management

·        
Driving
Next-Generation Innovation Ecosystems

Classrooms 1st floor: 130,
145, 155, 160

Participants
to go to their workshop room as assigned.

(Self
managed breaks – coffee available 1st

floor
)

Note:
the same workshops repeat on the morning of day two, but with a different group
of participants.  Each conference
attendee participates in two separate workshops during the course of the two
days.

 

Report
back and synthesis conversation
(4:15 – 5:15)

Lohrfink Auditorium, 2th floor

 

Reception
and Dinner
(6:30 – )

Speakers:
Paul Kedrosky, Kauffman Foundation

Senator Chris Coons (DE)

Reception:
Commons, 3rd floor

Dinner: Fisher Colloquium, 4th floor

 

Tuesday May 17:

Introduction
to day two
(8:45 – 9:00) Kenan Jarboe, Athena
Alliance

Fisher Colloquium, 4th floor

 

Working
group sessions #2
(9:00 – 12:00)

·        
Global Competition
and Collaboration

·        
Boosting
Competitiveness, Jobs and Growth

·        
Emerging Measures for
Strategic Management

·        
Driving
Next-Generation Innovation Ecosystems

Classrooms 1st floor: 130,
145, 155, 160

Participants
to go to their workshop room as assigned.

(Self
managed breaks – coffee available 1st
floor)

Note:
the same workshops as afternoon of day one, but with a different group of
participants. Each conference attendee participates in two separate workshops.

 

Lunch
and report out
(12:00 – 12:45)

Fisher Colloquium, 4th floor

 

World
Cafe rounds

(12:45 – 1:45)

Facilitated small group conversations
on conference topics

Fisher Colloquium, 4th floor

 

Plenary
summary session
(1:45 –2:45)

Moderator: Lesa Mitchell, Vice-President
for Innovation, Kauffman Foundation

Rebecca Blank,
Under Secretary of Commerce for Economic Affairs, Department of Commerce,
United States

Tony Clayton, Chief Economist, Intellectual Property Office,
United Kingdom

Raine Hermans, Director,
Strategic Intelligence, TEKES – the Finnish Funding Agency for Technology and
Innovation

John Mayo, Executive Director, Georgetown Center for
Business and Public Policy

Ken Warwick, Chair, Committee on Industry, Innovation and
Entrepreneurship, OECD

Fisher Colloquium, 4th floor

 

Closing
remarks
(2:45 –3:00)

Andrew
Wyckoff, 
Director, Directorate
for Science, Technology and Industry (STI), OECD

Richard
Cohon, Chairman, Athena Alliance

Fisher Colloquium, 4th floor

 

March trade in intangibles

This morning’s March trade data just released by the BEA is not pretty. The deficit grew by $2.8 billion to $48.2 billion. Exports were up by $7.7 billion but imports climbed by $10.4 billion. Economists surveyed by Dow Jones Newswires had expected a slightly smaller increase to $47.5 billion. There is some good news, however. The increased deficit was due to a large extent to a surge in petroleum imports, driven by higher oil prices. Exports of non-petroleum goods actually increased (up by $7 billion) more than imports (which were up only $4 billion).
Our intangible trade surplus grew in March by $139 million, mainly due to an increase in business services exports. Imports of business services increased only very slightly. However, royalty income (exports) declined while royalty expenses (imports) grew. Thus, the royalty balance declined slightly for the second month in a row.
Our Advanced Technology Products deficit also grew in March, increasing by $1 billion to $6.9 billion. Export grew across the board, but were swamped by a large increase in information and communications technology imports. The last monthly surplus in Advanced Technology Products was in June 2002 and the last sustained series of monthly surpluses were in the first half of 2001.
Intangibles trade-Mar11.gif
Intangibles and goods-Mar11.gif
Oil good intangibles-Mar11.gif

Note: we define trade in intangibles as the sum of “royalties and license fees” and “other private services”. The BEA/Census Bureau definitions of those categories are as follows:


Royalties and License Fees – Transactions with foreign residents involving intangible assets and proprietary rights, such as the use of patents, techniques, processes, formulas, designs, know-how, trademarks, copyrights, franchises, and manufacturing rights. The term “royalties” generally refers to payments for the utilization of copyrights or trademarks, and the term “license fees” generally refers to payments for the use of patents or industrial processes.


Other Private Services – Transactions with affiliated foreigners, for which no identification by type is available, and of transactions with unaffiliated foreigners. (The term “affiliated” refers to a direct investment relationship, which exists when a U.S. person has ownership or control, directly or indirectly, of 10 percent or more of a foreign business enterprise’s voting securities or the equivalent, or when a foreign person has a similar interest in a U.S. enterprise.) Transactions with unaffiliated foreigners consist of education services; financial services (includes commissions and other transactions fees associated with the purchase and sale of securities and noninterest income of banks, and excludes investment income); insurance services; telecommunications services (includes transmission services and value-added services); and business, professional, and technical services. Included in the last group are advertising services; computer and data processing services; database and other information services; research, development, and testing services; management, consulting, and public relations services; legal services; construction, engineering, architectural, and mining services; industrial engineering services; installation, maintenance, and repair of equipment; and other services, including medical services and film and tape rentals.