AAT, innovation, personnel

Panel bestows cum laude Ph.D. on AAT contributing author

Ranchordas, Sofia: Tilburg University doctoral dissertation defense

Tilburg University bestows doctorate cum laude  on AAT author Ranchordás

AfricanAntitrust.com contributing writer, assistant professor of law at Tilburg Univ., and lead author of our #InnovationAntitrust series Sofia Ranchordás was honoured yesterday by a distinguished panel of academics at Tilburg University (Netherlands) with a Ph.D. marked cum laude — a distinction granted only to approximately 2% of Dutch doctoral degrees.

She defended her dissertation on experimental legislation, sunset clauses, innovation, of which we publish a short “layman’s terminology” summary extract here.

Congratulations, doctor!

Sofia Ranchordas, Ass't Professor, Tilburg University

Sofia Ranchordás, Ph.D. cum laude, Ass’t Professor, Tilburg University (Law School)

10-Minute Presentation of Ranchordás Ph.D.
Dissertation in Layman’s Terms

Good afternoon ladies and gentlemen,

Thank you for being here today.

I especially welcome my front row guests, in particular my mother, and my sister who managed to convince her boss that it is possible do a PhD in Law, and two young guests that even had to ask permission to skip classes today:

Hallo Tim en Indy, fijn dat jullie er zijn en dat jullie vrij van school konden krijgen.

(Last week one of my students asked me why I had written yet another book to obtain a PhD degree. My straightforward answer was: because no one else has even written about it and the world needs to know more about sunset clauses, experimental legislation and innovation. My student wasn’t totally convinced by my answer, but at the end of these 10/9 minutes I hope you will be.

Experimental legislation, sunset clauses, innovation: three enigmatic words, 3 Pandora boxes to lawmakers, 3 years and 3 months to write one book. [And as you can see, it is a thick one, but not thick enough to ask all the questions that should have been asked or to provide all the answers]. This book tells the story of two legislative instruments which have been overlooked by legislators. Two instruments that seem to have much to offer to that one reality we all seek these days: innovation.‘

1. ‘Sunset clauses’ are dispositions that impose the termination of a law after a determined period, which means that a law or some of its dispositions might only last for 5 years.

2. ‘Experimental legislation’ submits new rules to a test, trying them out in the real world, testing their effectiveness. The new rules are tried in a part of the territory, while the ‘old ones’ remain applicable to the other. At the end of a certain period, results are compared and, in principle, the legislator ‘should allow the best law to win. However, in the lawmaking process the legislative winner does always not take it all. Politics very often does.

3. ‘Innovation’ is a broad concept that cannot be reduced to a brilliant idea: it is more and less than this common perception of the innovative wheel, a light bulb or a pair of Google glasses. Innovation is instead the first successful commercialization of a new idea, brilliant or not, that can improve the existing state of technology of society.

4. Innovation is ‘a kind of magic’: it is our hope in difficult times, the promise for long-term sustainable growth. Innovation is also ‘a crazy little thing’: it is all around us, but it is impossible to grasp and to generate through a simple formula. Instead, it is a very complex process that can be stimulated or impeded by a number of elements, including outdated regulation.

5. It is a difficult mission to regulate innovation but I know two perfect candidates for the job: sunset clauses and experimental legislation. They provide the flexibility and adaptability that regulators need to regulate under uncertain conditions, allow legislators to revise rules as more information about innovative products becomes available, and terminate obsolete dispositions.

6. However, as always, friends get the best jobs, strangers do not. And that is the case of sunset clauses and experimental legislation: they are total strangers to most lawyers and lawmakers. Before I started doing my research, how many of you had ever heard about sunset clauses and experimental regulations? And even now how many would be able to recognize you?

7 In my research, I looked into the reasons why sunset clauses and experimental legislation have not been more often used to regulate innovative fields and there are legal and non-legal reasons underlying this general resistance to these instruments. An apparently simple research question, you might say. However, as life often teaches us, appearances are misleading and this question allowed me to rethink the meaning of different principles of law in a changing world, the meeting of minds between innovators and regulators and the non-legal elements influencing the lawmaking process.

8. There appears to be a widespread belief that these instruments ‘are bad’ because they violate a number of principles of law we hold dear. That is the case of the principle of legal certainty that is often connected with the idea of predictability, stability and continuity of law. However, some laws cannot live forever because they regulate phenomena that evolve rapidly or problems that might be temporary. Sunset clauses and experimental legislation can provide in these cases more temporary certainty, because they do not expose laws to the erosion of time. In my dissertation, I also argue that experimental laws do not endanger the principle of equal treatment. While it is true that not all citizens will be equal before the law, this differentiation will be temporary, objectively justified and it is intrinsic to the main objective of experimental legislation: gather more information about the effects of a new law.

10. The scarce use of sunset clauses and experimental legislation can be attributed to a number of non-legal elements, such as lack of information or expertise, a certain intellectual reluctance towards termination of laws or the experimental method, high costs, fear of being confronted with unpleasant facts, or political rationality. While law is for a great deal about politics, there must be a way to ensure that some legislative decisions are rendered more transparent.

11. The real Achilles heel of experimental legislation and sunset clauses is the lack of a clear legal and methodological framework. Legislators do not know when they should choose temporary laws in detriment of lasting ones, how to enact them and for how long. The main contribution of my dissertation lies in the design of a framework, where guidelines are provided to lawmakers: go for sunset clauses when you expect a technology to evolve rapidly, experiment with new rules when you do not know enough about their effectiveness; make sure experiments are meaningful and truly convert the lawmaking process into a learning one, set transparent evaluation criteria and ask regulators to justify their decisions to follow or reject the results of an experiment. Educate lawmakers and citizens with the truth of the facts and not the power of opinions.

12. Are sunset clauses and experimental legislation a blessing or a curse to innovation? I leave you, ladies and gentlemen, with this question. It results from my research that they are not a curse for a law that keeps up with reality, for a law that lives along the paths of innovation. Instead, they bless the courageous legislators that try new laws to see if they work, allow laws to expire when they are no longer necessary, removing unnecessary burdens from the shoulders and pockets of innovators. However, sunset clauses and experimental legislation will only be blessings for innovation, if they are drafted along the lines of law. However, and excuse me for citing a lawyer in a speech supposed to be to laymen: as Felix Frankfurter affirmed: ‘science and technology cannot reshape society while law maintains its Blackstonian essence’, i.e., in layman’s terms this means: while lawyers try to confer their own interpretation to every single phenomenon, lagging behind reality.

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BRICS, full article, innovation

Regulation & Innovation in Africa: A licence to innovate?

Our popular Innovation & Antitrust series continues on its popular path to its 3rd installment, in which its author, Ass’t Professor Sofia Ranchordas, deals with regulation.  Prior pieces included the topics of ‘convergence or customization?’ and the deeply inquisitive ‘in the eye of the beholder…?’  The series continues.

Regulation and Innovation in Africa: licence to innovate?

 new multi-part series

Ass’t Prof. Sofia Ranchordás (Tilburg Univ. Law School)

In part II of the African Antitrust Innovation Series, Sofia Ranchordás discussed the relevant concept of ‘innovation’ underlying the discourse on innovation/competition/IP in African countries.  She concluded that in the African context, the advancement of economic growth may imply adopting a context-specific concept of ‘innovation’, where more attention is paid to incremental improvements performed by local innovators. Before analyzing whether competition laws can play a role in the advancement of innovation in the African context, it is important to take two steps back in this third part of the Innovation and Antitrust Series and:

(i) Analyze the African innovation policy context and its challenges;

(ii) Question whether regulation can and should play a role in the advancement of innovation.

(i) Wanted: Innovation in Africa

Up until recently, COMESA did not adopt an interventionist approach towards innovation in its member states, however it was expected that African governments would devote at least one per cent of GDP to R&D. Year after year, member states failed to achieve this objective and COMESA soon realized that in Africa only the South African government (ironically, a non-member) was in state to successfully pursue such goal. In 2012, the COMESA Committee of Ministers of Science and Technology recommended the creation of an Innovation Council and setting up an Innovation Fund, promoting efforts to harmonize intellectual property rights, and continued infrastructure development to facilitate regional trade. The creation of the COMESA Innovation Council in April 2013 evidenced a clear awareness of the importance of enhanced technological innovation for the competitiveness of African countries. This council was conceived mainly ‘to provide advice to member states relating to existing and new knowledge and innovations and best ways of applying it in the member states’.[1] The COMESA Innovation Council departed from the premise that the late adoption of technological innovation would be an advantage for cost effective developments due to the limited negative effects. Besides COMESA, other organizations have been supporting African countries investment in R&D. This is the case of UNESCO which has been coordinating the UN Science & Technology cluster and the African Union through the African Observatory of Science, Technology and Innovation (AOSTI).[2]

While an Innovation Council is much needed in Africa, the question that needs to be posed here is whether these countries really know what it takes to effectively promote innovation. Are African governments enacting the most adequate rules to foster investment and terminating the dispositions that contribute to the innovation chasm that characterizes a number of African countries?

While national governments have been trying to develop their own innovation policies and programmes, it has also been argued that innovation in Africa faces a significant hurdle:  donor nations are the ones setting the tone. Perhaps to ensure that African governments are able to define their own innovation priorities, the COMESA Innovation Council is solely composed by eminent scientists of member countries. However, this may not be enough. In the 2013 African Economic Outlook report,[3] it was underlined that despite Africa’s ‘impressive growth over the past fifteen years (…) institutions and regulations for private sector activity must be further improved. Addressing infrastructure bottlenecks increasing access to key public services (…) would put countries on a durable high growth path and reduce poverty and inequality’.[4] In the specific case of extractive-resource exploration and exploitation, this report explicitly states that more regulations that provide incentives for investment are needed. The 2009 African Economic Outlook had earlier verified that the ineffective African regulatory systems were one of the reasons why African was seriously lagging behind. This 2009 report concluded that ‘African regulators need more muscle’ and particular attention should be paid to telecoms regulators who tend ‘too often favor incumbent fixed-line operators, who have typically problems to make profits, over new entrants (…) [impeding] competition and private investment.’[5]

Willingness to innovate, investment and know-how are certainly essential elements of innovation, but any policy initiatives may be jeopardized by an ineffective regulatory framework. Stating that African regulatory systems must be improved seems to be stating almost the obvious. Explaining why may actually shed more light on how this should be done.  Does regulation really matter for innovation?

(ii) Innovation: law gives, and law may take it away

National laws and regulations can act as ‘licences to innovate’. But they can equally be regarded as obstacles to innovation, should they be excessive, costly and/or cause regulatory delays. Regulation and innovation can either be ‘friends’ or ‘foes’. Regulators can hinder it by imposing too many regulatory requirements with which companies must comply; or instead, facilitate it by providing a rapid and flexible regulation of innovations, and ensuring that novelties are quickly introduced in the market. The mentioned destinies depend notably on how well lawmakers know the nature and dynamics of the innovation process.[6] The relationship between law and regulations and innovation has often been underestimated in the literature and the study of the impact of the former on the latter is often vaguely justified and not supported by empirical evidence.[7] However, this is far from being an unimportant topic: regulation can impede or even facilitate innovation, depending on the type, timing, duration and the dispositions in question.

Regulation as a ‘foe’ to innovation

Legislative or regulatory instruments have been traditionally regarded as obstacles to innovation: the bureaucratic impositions of law are quickly accused of stifling creativity and commercial success, contributing to the image of ‘law as the bogeyman’.[8] This is explained, for example, by the multiple regulatory burdens imposed by regulators that often outweigh the harms they intended to prevent. High compliance costs may have a negative impact on investment, particularly in the case of smaller innovators with more limited capital. In addition, regulation has been regarded as an impediment to innovation because ‘entrepreneurs and government regulators see the world quite differently’: while the first see flexibility and risk as parts of the business, regulators are often risk-averse, preferring stability and long-term predictable outcomes.[9]  Moreover, the lack of experience with the private sector, the growing bureaucracy and entrenchment in agencies led to the enactment of stricter regulation aimed to avoid future problems. This need to regulate the unpredictable generated uncertainty, conflicting regulations, and had counterproductive effects, since the very same rules which aimed at stimulating innovation ended up frustrating it. [10]

Although excessive regulation may stifle regulation, innovation cannot be left unregulated. Innovative products can potentially endanger a number of significant social and economic values (e.g. public health, environment, or fair competition). The regulation of innovation should perform multiple tasks: regulate the risks inherent to novel products and services; ensure that innovators do not innovate beyond and against law; facilitate and even promote the development and implementation of innovations, by creating a legal order adapted or adaptable to the characteristics of the innovation process.[11]

Regulation as a ‘friend’ to innovation

Regulators all over the world are aware of the importance of innovation for a country’s competitiveness and have tried to actively encourage firms to innovate. This was visible in the well-known case of the U.S. Department of Justice’s command on Microsoft to sell its Internet Explorer as a separate product from its Windows operating system.[12] This idea that authorities should actively intervene, can be indirectly derived from the ‘Porter hypothesis’,[13] according to which public authorities, and specifically competition authorities, should guarantee that market forces drive firms to innovate, notably through the implementation of stringent competition policy.[14] The concretization of legislative or administrative interventions in this field does not always need or can be reduced to an aggressive implementation of competition law.[15] Innovation is essential to increase the competitiveness of firms, but the regulation of the former goes beyond competition concerns and requires a comprehensive regulatory approach.

Legal rules do not necessarily stifle innovation, by discouraging entrepreneurs from investing in R&D. Instead, regulation can equally assume a paternalist role and have a positive effect on behavior—as argued by behavioral law and economics scholars—and ultimately influence (‘nudge’) entrepreneurs to make the desired investing decisions.  The general impact of legislation and regulation on human behavior has been studied in the last decades by the behavioral law and economics literature.[16] A behavioral approach to law and economics proceeds to a study of legal rules informed by knowledge about human behavior and attempts to discover how law can be used to achieve particular ends. Behavioral law and economics aims to ‘regulate so as to improve economic welfare by more closely aligning each individual’s actual choices with his “true” or unbiased preferences without reducing his liberty.’[17] There are reasons to believe that this behavioral approach has been shaping policy and rulemaking in the United States, notably under the Obama Administration,[18] which has been particularly interventionist as far as the advancement of innovation is concerned.[19] If this interventionist approach has been successfully implemented in different countries, one can and should ask whether African governments should not also try to ‘nudge’ innovation, exempting innovators from complying with unnecessary burdens, providing better legal protection to investments, and improving the overall transparency of its legal system.

(iii) A regulatory recipe for more innovation

The role played by regulation in the advancement of innovation deserves more attention from most African countries and international organizations operating in this continent. Governmental innovation policies and the regulation of innovation should be elected as priority concerns in the quest for more innovation. [20] African governments could try to combat the innovation chasm that characterizes their systems if they create ‘innovation-friendly’ regulatory frameworks that make their legal systems attractive to investors and innovators. I leave you with a draft of a partial recipe to this ‘friendship’:

1. A solid legal and procedural framework, characterized by transparent and accountable regulatory authorization procedures;

2. Bonuses and prizes for innovators;

3. Innovation waivers,[21] i.e., regulation can facilitate innovation, notably by granting entrepreneurs exemptions from complying with certain rules as long as these companies substantially invest in R&D or authorizing companies to develop certain activities without further requirements;

4. Tax credits for companies investing in R& D projects and cooperating with local universities;

5. Subsidies to R&D projects partially financed by international organizations;

6. Termination of unnecessary regulatory burdens by inserting sunset dispositions in a number of regulations regarding innovative fields;

7. Attractive start-up visa regulations for innovators with concrete business plans involving local natural or human resources that may result in the creation of jobs;

8. Development of clear competition policies and better enforcement of competition laws. This last suggestion shall be further developed in part IV of the Innovation & Antitrust Series.

FOOTNOTES:


[1] Press release of the Office of the Prime Minister of Uganda, April 12th, 2013, available at http://www.opm.go.ug/news-archive/comesa-innovation-council-inaugurated.html

[2] See African Observatory of Science, Technology and Innovation, Assessing Best Practices of Science, Technology and Innovation, AOSTI Working Papers, No.1 (African Union 2013), available at http://aosti.org/index.php/working-papers/finish/6-working-papers/9-aosti-workingpapers1-executivesummary/0

[3] The African Economic Outlook is an initiative funded by a number of international organizations, including the African Devepment Bank Group, the OECD, the UN Economic Commission for Africa and the UN Development Programme for Africa. For more information, see http://www.africaneconomicoutlook.org/en/

[4] African Economic Outlook 2013, Special theme: Structural Transformation and Natural Resources, pocket edition, available at http://www.africaneconomicoutlook.org/fileadmin/uploads/aeo/PDF/Pocket%20Edition%20AEO2013-EN.web.pdf

[5] See African Economic Outlook 2009, summary available at http://www.africaneconomicoutlook.org/en/in-depth/ict-africa/

[6] For an interesting overview of the dynamics of innovation throughout time, see François Caron, Dynamics of Innovation: The Expansion of Technology in Modern Times (Oxford: Berghahn Books, 2013)

[7] This concern is far from being a recent one, see Wesley A. Magat, ‘The effects of Environmental Regulation on Innovation’ (1979) 43 Law & Contemporary Problems 4.

[8] Wolfgang Hoffmann-Riem, Rechtswissenschaftliche Innovationsforschung als Reaktion auf gesellschaftlichen Innovationsbedarf, Überarbeite Fassung eines Vortrages aus Anlass der Überreichung der Universitätsmedaille am 19.12.2000 in Hamburg, available at <http://www2.jura.uni-hamburg.de/ceri/publ/download01.PDF>.

[9] James T. O’Reilly, ‘Entrepreneurs and Regulators: Internet Technology, Agency Estoppel, and the Balance of Trust’ (2000) 10 Cornell Journal of Law & Public Policy 63.

[10] Aryeh S. Friedman, ‘Law and the Innovative Process: Preliminary Reflections’ (1986) Columbia Business Law Review 1.

[11] Robert Cooter, Aaron Edlin, Robert E. Litan, George L. Priest, ‘The importance of law in promoting innovation and growth’ in The Kauffman Task Force on Law, Innovation and Growth, Rules for Growth (Kauffman 2011) 6.

[12] Lawrence B. Landman, ‘Competitiveness, Innovation Policy, and the Innovation Market Myth: A Reply to Tom and Newberg on Innovation Markets as the “Centerpiece” of “New Thinking” on Innovation’ (1998) 13 Saint John’s Journal of Legal Commentary 223.

[13] Michael Porter, ‘The Competitive Advantage of Nations’ (1990) Harvard Business Law Review April-March 75.

[14]For a critical perspective on the Porter’s hypothesis, see Lawrence B. Landman, ‘Competitiveness, Innovation Policy, and the Innovation Market Myth: A Reply to Tom and Newberg on Innovation Markets as the “Centerpiece” of “New Thinking” on Innovation’ (1998) 13 Saint John’s Journal of Legal Commentary 223, 231-232.

[15] This topic shall be thoroughly analyzed in part IV of Innovation & Antitrust Series.

[16]For an overview, see Christine Jolls, Cass R. Sunstein, Richard Thaler, ‘A Behavioral Approach to Law and Economics’ (1998) 50 Stanford Law Review 1471.

[17] Joshua D. Wright, Douglas H. Ginsburg, ‘Behavioral Law and Economics: Its Origins, Fatal Flaws, and Implications for Liberty’ (2012) 106 Northwestern University Law Review 1033.

[18] Joshua D. Wright, Douglas H. Ginsburg, ‘Behavioral Law and Economics: Its Origins, Fatal Flaws, and Implications for Liberty’ (2012) 106 Northwestern University Law Review 1033, 1053.

[19] See the September 2009 Strategy for American Innovation, combining a number of programs focused on the promotion of innovation and Obama’s speech, available at Speech of Barack Obama, August 5, 2009, available at http://www.whitehouse.gov/blog/Spurring-Innovation-Creating-Jobs. A Strategy for American Innovation: Driving Towards Sustainable Growth and Quality Jobs, White Paper, 2009, available <http://www.whitehouse.gov/administration/eop/nec/StrategyforAmericanInnovation>

[20] Stuart Minor Benjamin, Arti K. Rai, ‘Fixing Innovation Policy: a Structural Perspective’ (2008) 77 George Washington Law Review 1.

[21] Wolfgang Hoffmann-Riem, ‘Rechtswissenschaftliche Innovationsforschung als Reaktion auf gesellschaftlichen Innovationsbedarf’, Überarbeite Fassung eines Vortrages aus Anlass der Überreichung der Universitätsmedaille am 19.12.2000 in Hamburg, available at <http://www2.jura.uni-hamburg.de/ceri/publ/download01.PDF>.

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