Proxy Signals: Capturing Private Information for Public Benefit

This Article presents an original empirical methodology to identify which patent laws will best promote optimal incentives to innovate for society. Vociferous debates over patent reform pit the United States’ largest innovation industries against each other in a dispute concerning whether stronger or weaker patent rights are necessary to promote innovation. Past efforts to answer this question have been thwarted by an inability to parse the impossibly complex social and legal relationship between innovation and patent law. Rather than considering such problems directly, the proxy technique introduced here offers a new framework to leverage indirect signals that capture better information than previously available concerning how best to promote incentives to innovate. In certain contexts, it is possible to use empirical information about the trade-off between the incentives and exclusivity costs of patent law to identify particular private industries that (1) face trade-offs  © 2012 Gregory N. Mandel. Peter J. Liacouras Professor of Law and Associate Dean for Research, Temple University—Beasley School of Law. J.D., Stanford Law School; B.A., Wesleyan University. I am grateful for valuable comments on earlier drafts of this work from Jonathan Barnett, Jane Baron, Michael Carrier, Christopher Cotropia, Ben Depoorter, Ezra Friedman, Brett Frischmann, John Golden, Craig Green, David Hoffman, Robert Hunt, Mark Lemley, Clarissa Long, Michael Meurer, David Post, Ted Sichelman, and Chris Sprigman, and for feedback from participants at the University of Pennsylvania Law School‘s Center for Technology, Innovation, and Competition Workshop, the 2010 Intellectual Property Scholars Conference, the Cyberlaw Colloquium at Rutgers School of Law, the Boston Intellectual Property Colloquium at Suffolk Law School, and The Future of Patent Law conference at the University of San Diego School of Law. I also want to thank Carolyn Castagna, Douglas Maloney, and Evan Smith for their outstanding research assistance on this project. Washington University Open Scholarship 2 WASHINGTON UNIVERSITY LAW REVIEW [VOL. 90:1 equivalent to those that society faces, and (2) possess far superior information concerning how best to balance such trade-offs. Where industries satisfy both criteria, their private preferences will happen to align with social innovation objectives and can be mined for previously untapped, socially beneficial information. The proxy signal approach provides a new public choice methodology, designed to leverage the strength of collective private industry and market knowledge, in a manner that can be applied to other legal domains beyond patent law.