t byfield on Sat, 29 May 1999 23:07:56 +0200 (CEST)

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<nettime> (fwd) Intellectual Property and Innovation

     [orig to <lbp-talk@lists.panix.com>]

----- Forwarded 

Date: Sat, 29 May 1999 12:23:55 -0400
From: Doug Henwood <dhenwood@panix.com>
Subject: IP and innovation

[Interesting given the drift towards tighter control of intellectual
property, thanks to the increasing privatization of research and U.S.
government pressure internationally. And given the underlying philosophical
justification of both, the supposedly fruitful link between private rewards
and innovation.]

"The Legal Infrastructure of High Technology Industrial
 Districts: Silicon Valley, Route 128, and Covenants Not to

              Columbia Law School
              Stanford Law School

Document:  Available from the SSRN Electronic Paper Collection:

    Date:  July 1998

   Email:  Mailto:ronald.gilson@law.columbia.edu
  Postal:  Columbia Law School
           435 West 116th Street
           New York, NY 10027  USA
   Phone:  (212)854-1655
     Fax:  (212)854-7946

 Recent scholarship has argued that the comparative success of
 the Silicon Valley high technology industrial district and
 failure of Route 128 outside of Boston, resulted from different
 patterns of inter-firm employee mobility which, in turn, led to
 differing patterns of industrial organization: network
 organization as opposed to traditional vertical integration. The
 cause of the different patterns of employee mobility is said to
 be cultural differences between California and Massachusetts.
 This paper offers a different causal analysis. After reviewing
 the new economic geography's emphasis on inter-firm knowledge
 transfers as an agglomeration economy, I focus on the critical
 role of employee mobility -- the vehicle for inter-firm
 knowledge transfers -- in facilitating second-stage
 agglomeration economies: those that allow the district to
 transcend its original product cycle and reinvent itself. In
 this account, the legal rules governing employee mobility are a
 causal antecedent of the construction of each district's
 culture. In fact, California law prohibits the most effective
 means of protecting trade secrets embodied in tacit knowledge --
 a contractual post-employment covenant not to compete.
 Massachusetts law, in contrast, allows their enforcement.
 Consistent with the new economic geography's emphasis on path
 dependence, the paper shows that California's unusual legal
 regime dates back to the early 1870's, a serendipitous result of
 the historical coincidence between the codification movement in
 the United States and the problems confronting a new state in
 developing a coherent legal system. The paper concludes with a
 cautionary note concerning the implications of the analysis for
 three related subjects: the standard law and economic
 prescription to fully protect property rights in intellectual
 property; a disturbing recent line of cases concerning claims of
 "inevitable disclosure" that threatens to turn trade secret law
 into the judicial equivalent of a covenant not to compete; and
 the right strategy for policy analysts assessing reform of a
 region's legal system to encourage high technology industrial

JEL Classification: D2, K2, L5, R1

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