Less trust, less IP?

What is the relationship between trust and IP? While this Kat has pondered this question from time to time, his musings were particularly aroused by a recent column that appeared on 7 December in the Lexington section of The Economist. Entitled “Why Americans are so angry: America’s political divisions have deeper social consequences”, here, the piece discussed the profound decline of trust of the U.S. citizenry based on recent survey data. The survey results revealed that only one in ten voters have any trust in Congress, and that Americans are more likely than Italians to agree with the proposition “the police, business and the media are all ‘corrupt or extremely corrupt’". The iconic Edelman Trust Barometer has just come out with its most recent annual results, and it too points to massive public distrust, particularly of government, here.

Why should an IP person be concerned by this apparent precipitous decline in trust as a social construct in the U.S. and other societies? The reason is that, more and more, economists are identifying a significant connection between trust and economic growth. Indeed, nearly a decade ago, Steve Knack, a senior economist at the World Bank claimed that over 99% (!) of U.S. growth was ultimately connected with the fact that U.S. is (or at least was then) a high-trust country. As noted in Forbes magazine, “The Economics of Trust”, here “… [A]bove all, trust enables people to do business with each other. Doing business is what creates trust”. According to Mr. Knack, the U.S. is rich ultimately because it is a high-trust country, while a country such as Somalia is not, because it is a low trust country. Expressed less provocatively in the Wikipedia entry, "Trust (social sciences)" here, “social trust benefits the economy and … a low level of trust inhibits economic growth.”

This is especially so for the critical notion of “institutionalized trust” which, in Mr. Knack’s words, “lets you give your credit card number over the Internet.” Or, as stated in the Wikipedia entry,

“[t]rust is … seen as an economic lubricant, reducing the costs of transactions between parties, enabling new forms of cooperation and generally furthering business activities, employment and prosperity.” 

As such, trust becomes a precious form of what Professor Robert Putnam of Harvard, here, calls “social capital.” The problem seems to be that there is less and less such social capital as the aggregate measure of social trust all point to a precipitous decline.

This Kat hopes that he has not lost Kat readers in this brief foray into economics and sociology. For those of you still engaged, the question is, once again—“and what about IP”? Let’s take patents and, in particular, the controversy over so-called patent trolls. One of the arguments made in support of legislation to rein in patent trolls is that they are taking advantage of low quality patents that should have never been granted. But if one thinks about this assertion, what it is really saying, in the context of trust and social capital, is that for (an increasing) some in the patent world, there is simply less faith in the efficiency and even the integrity of the patent system. If we had “better” patents and a “better” patent examination system, there would be less (or even no?) pernicious patent trolling. But this is simply another way of saying that there is less trust in the patent system and ultimately perhaps, less public support for the patent system in its entirety.

The issue of the decline of public trust is also germane to trade secrets. One of the defining characteristics of trade secret protection and exploitation is the centrality of trust between the parties involved. Whether I choose to keep my trade secret within the confines of my immediate business, or if I choose to share it with outside persons, the ultimate consideration is broadly the same. As the owner of the trade secret, I want to be able to trust that such parties will maintain its confidentiality. If I can trust the person, then presumably all parties subject to the disclosure of the trade secret will enjoy an economic benefit. As such, the personal and economic implications of a high level of trust are joined.

But if my trust is misplaced, then there is a palpable risk that the trade secret will be disclosed in an unauthorized fashion. When this happens , I lose the primary benefit of trade secret protection, namely, my control over the confidentiality of the information. Whatever compensation a court might award me for the unauthorized disclosure, the ultimate result is that I have lost trade secret protection forever with respect to that information. Moreover, having been once burned, perhaps I will be much more chary about sharing my trade secrets with others in the future. Seen in this way, trust lies at the very heart of trade secret protection and exploitation.

Given the importance of the sharing of trade secrets as a driver of technology, any macro-trends, such as a decline in the sharing of trade secrets, should be of research interest. At the least, it seems to this Kat that it is a worthwhile hypothesis to explore (and even refute, if the search results so warrant). This Kat recently expressed elsewhere, in “The econometrics of IP: The case of patents and innovation” here, his concern over the seemingly limited interest that econometric studies have shown in research about trade secrets in comparison with patents. On the other hand, trust is a topic that has attracted economic scholars. Maybe there are researchers out there who can apply this expanding corpus of trust in the economic context to the question of how it impacts on the willingness of persons to share their trade secrets.