A Property Theory of Medical Innovation

In discussions about the proper scope and strength of intellectual property (IP) protection, commentators frequently note that robust IP rights for medical technology developers are necessary to offset the costs of regulatory scrutiny by the U.S. Food and Drug Administration (FDA). This observation, while true, fails to capture important nuances in the relationship between IP and FDA regulation. Ostensibly conflicting IP and regulatory systems actually are overlapping, complementary components of a composite legal scheme governing information production and distribution. Both systems create incentives to produce intangible goods, albeit different types of goods at different points in technology development timelines. IP pulls inventions into the commercial arena, and public health regulation pushes developers to move nascent discoveries downstream along innovation pathways. Importantly, interplay between IP and regulation creates feedback loops of cumulative technological innovation. This Article highlights the functional relationships between IP and regulatory laws to advance a holistic approach to medical innovation policy. It introduces the term “regulatory property” to describe how administrative oversight gives rise to the creation of valuable information resources. Regulatory takings and givings involve government redistributions of preexisting goods that transfer wealth among affected members of society. By contrast, regulatory property refers to the process whereby government regulation leads to the production of new information goods. As regulatory property is generated, interacting federal and state laws manage its allocation across private and public domains. The Article proposes strategies to address the unique challenges raised by innovation that is not tied to the creation of new tangible things, such as diagnostic algorithms and newly discovered uses for known products. More broadly, it suggests that understanding the dynamics between intellectual and regulatory property aids in developing coherent governance schemes for all potentially beneficial, risky medical technologies