Innovate or Borrow?: A Model for Regulating Sequential Innovation

Abstract

When creators and innovators take up a new task, they face a world of existing creative works, inventions, and ideas, some of which are governed by intellectual property rights. This presents a choice: Should the creator pay to license those rights? Or, alternatively, should the creator undertake to innovate around them? Our Article formulates this “innovate/borrow decision” as the fundamental feature of sequential creativity, and it maps a number of factors — some legal, some contextual — that affect how creators are likely to decide between borrowing from existing IP or innovating around it. Importantly, creators are influenced by more than just formal IP rights. We identify three other sets of factors — Technological & Artistic, Market, and Behavioral — that can also affect the path of sequential innovation by encouraging either borrowing or innovating. Our focus on creators’ innovate/borrow decisions offers a richer, but more complex, account of the nature of sequential innovation and, in so doing, yields insights into its efficient legal regulation.