Heiko Richter, Shraddha Kulhari, Carolina Banda, Daria Kim, Valentina Moscon, Josef Drexl, Jörg Hoffmann, Klaus Wiedemann, Begoña Gonzalez Otero (v.l.n.r.)
Opinion  |  06/14/2022

Position Statement on the EU Data Act

Data generated through the use of digital services and products offer enormous economic potential. The EU Data Act is intended to regulate access to and use of such data. But does the current legislative proposal ensure that the interests of all stakeholders are adequately taken into account? A research group at the Institute has analyzed this question and written a comprehensive position statement on the subject.

Heiko Richter, Shraddha Kulhari, Carolina Banda, Daria Kim, Valentina Moscon, Josef Drexl, Jörg Hoffmann, Klaus Wiedemann, Begoña Gonzalez Otero (v.l.n.r.)
Research Group: Heiko Richter, Shraddha Kulhari, Carolina Banda, Daria Kim, Valentina Moscon, Josef Drexl, Jörg Hoffmann, Klaus Wiedemann, Begoña Gonzalez Otero (f.l.t.r.)

Directly to the Position Statement (PDF).

Miscellaneous  |  05/04/2022

EPO ARP Grant for Deep Learning Project on Knowledge Flows Between Science und Technology

Under the European Patent Office’s Academic Research Programme, a research group of the department Innovation and Entrepreneurship Research has received a major grant for a project using Deep Learning to investigate knowledge flows between science and technology.

The European Patent Office (EPO) recognizes the importance of high-quality research on patent-related intellectual property (IP) matters to inform policymakers and facilitate sound business decisions in a context where intangible assets, innovation, and IP rights have become pivotal in the economy. With the Academic Research Programme (EPO ARP), launched in 2017, the EPO seeks in particular to encourage more academic IP research and to promote the dissemination of research results.


In order to facilitate effective research collaboration, the EPO supports collaborative research schemes in which scientific partner institutions team up to work on projects with a broader scope, bigger budget, and longer duration, and with the potential to involve a range of EPO departments. The current EPO ARP comprises two main streams: “The New Frontiers of Innovation” and “Digital Technologies for IP”. Out of 36 proposals submitted to the EPO, only five were awarded a grant. Grant-holders receive up to 150,000 Euro for their projects.


Within the scope of the first stream and the research area “From University Research to Innovation Ecosystems”, a research group around Dietmar Harhoff, with Sebastian Erhardt, Michael E. Rose, Mainak Ghosh, and Erik Buunk, has now received a major grant for the project “Tracing the Flow of Knowledge from Science to Technology Using Deep Learning”.


The team seeks to harness the semantic similarity between patents and scientific publications using the latest advances in machine learning. The solution utilizes transformer models that identify semantically similar documents. A patent that is highly similar to prior scientific publication has possibly been influenced by it. The approach is scalable and able to handle large amounts of text. Once documents are semantically linked, the data is used to draw inferences regarding the diffusion of knowledge from science within publications and to and within patents.


Based on the information generated by the approach, the team will be able to build an entire knowledge landscape to trace the significance of fundamental research in emerging technologies.

Study  |  05/01/2022

Ruled by Robots – How Do Humans Perceive Technology-Assisted Decision-Making?

Algorithms and Artificial Intelligence (AI) have become an integral part of decision-making. Would people prefer to have moral decisions that affect them made by a human or an algorithm? In a new study, this and other questions were investigated in a laboratory experiment.

As technology-assisted decision-making becomes more prevalent, it is important to understand how the algorithmic nature of the decision-maker influences how affected people perceive these decisions. The application of algorithmic aids spans from prediction decisions of various kinds, for example, whom to hire, and what salary to offer, to moral decisions with no objectively correct solution, such as how to distribute a bonus within a team fairly.


The authors Marina Chugunova and Wolfgang J. Luhan (University of Portsmouth) use a laboratory experiment to study the preference for human or algorithmic decision-makers in redistributive decisions. Redistributive decisions can be seen as a type of moral decisions, where the definition of correct or fair depends on the observer’s personal ideals and beliefs. In particular, the authors consider whether an algorithmic decision-maker will be preferred because of its unbiasedness. Defining which decision-maker is preferred and whose decisions are perceived to be fairer can potentially improve the acceptance of decisions or policies, and with it, the compliance.


The Experiment


In the experiment, the main aim was to create a situation where participants’ preference for either a human or an algorithmic decision-maker to redistribute income was observable. First, participants individually earned their initial income by completing three tasks. The three tasks mimicked three potential determinants of income that are central to major fairness theories: luck, effort and talent. Then, the players were matched into pairs and had to choose a decision-maker: either an algorithm or a third party human. The decision-maker decided how to redistribute the total earnings of the pair between the two members. To test the role of bias, a laboratory-induced source of potential discrimination for the human decision-maker was introduced. Then, the participants learned the decision and had to report their satisfaction and their rating of how fair a particular redistribution decision was.


The Findings


Contrary to previous findings, the authors find that the majority of participants ‒ with over 60% ‒ prefer the algorithm as a decision-maker over a human. Yet, this is not driven by concerns over biased decisions of a human. Despite the preference for algorithmic decision-makers, the decisions made by humans are regarded more favorably. Subjective ratings of the decisions are mainly driven by own material interests and fairness ideals. As far as fairness ideals are concerned, the players in the experiment show a remarkable flexibility: they tolerate any explainable deviation between the actual decision and their own ideals. They are satisfied and consider any redistribution decision that follows fairness principles to be fair, even if it does not correspond to their own principles. Yet, they react very strongly and negatively to redistribution decisions that do not fit any fairness ideals.


The Conclusion


The results of the study suggest that even in the realm of moral decisions algorithmic decision-makers might be preferred over human decision-makers, but the actual performance of the algorithm plays an important role in how the decisions are rated. To “live up to the expectations” and increase the acceptance of these AI decisions, the algorithm has to consistently and coherently apply fairness principles.


Directly to the publication of the study:


Marina Chugunova, Wolfgang J. Luhan
Ruled by Robots: Preference for Algorithmic Decision Makers and Perceptions of Their Choices
Max Planck Institute for Innovation & Competition Research Paper No. 22-04

Dr. Heiko Richter, LL.M. (Columbia)
Miscellaneous  |  02/24/2022

Digital Markets Act: New Rules for Tech Giants

The various European Union bodies came to a preliminary agreement on the new Digital Markets Act (DMA) on the 24 March 2022. The EU is planning to limit the market power of tech giants such as Google, Apple, Facebook/Meta, Amazon, and Microsoft in order to safeguard competition in the European market. In the following interview, Heiko Richter, Senior Research Fellow at the Institute, explains the purpose of the new legislation and some of its potential weaknesses.

Dr. Heiko Richter, LL.M. (Columbia)
Heiko Richter, Senior Research Fellow at the Max Planck Institute for Innovation and Competition

The idea of limiting the power of digital giants is not new. Rules punishing abuse of dominant position or unfair business practices already exist. What's about to change?


The Digital Markets Act, or DMA for short, which is currently being negotiated in non-public consultations between the EU Parliament, Council and Commission, aims to provide a uniform EU-wide legal framework for digital markets in order to proactively prevent distortions of competition and stop certain business practices.The aim is also to facilitate the application of the law and speed up the process.


Why are the existing rules insufficient?


So far, especially in antitrust law, we have only ex-post rules: these only take effect after an infringement has occurred or is suspected. As a result, it takes a very long time before the behavior is sanctioned. In some cases, the contested acts took place up to ten years ago and the legal proceedings have still not been concluded. The result is that antitrust law is too slow because it takes action reactively.


What should change?


The basic concept of the DMA is upfront regulation: it will impose a mandatory code of conduct on major online service providers. With this in mind, it contains over a dozen directives and prohibitions, formulated in more or less specific language, with which these service providers are required to comply a priori. Failure to comply could result in severe sanctions. For example, the EU Commission has the power to fine service providers up to 20 per cent of their annual global turnover.


We'll come to the new rules in a moment. But first: Who does the planned regulation actually apply to?


According to the European Council's first press release, a service provider will be considered a "gatekeeper" if the parent company generates an annual turnover in excess of €7.5 billion or has a market value of more than €75 billion in the EU. The service also has to have had over 45 million end users per month and 10,000 commercial users within the EU per year over the past three years.

The respective service provider also has to offer one or more core services, such as social networks, search engines, browsers, messenger services, or virtual assistants, in at least three EU member states. However, networked TVs are not included.


Which obligations will gatekeepers have in the future?

So far, there are 18 obligations, but the list of obligations may be larger after the negotiations. Particularly relevant, for example, are prohibitions on tying registration for one service to registration for another, or prohibiting commercial users from offering their products and services on third-party platforms at different prices and conditions. In addition, operating systems such as Google's Android or Apple's iOS would have to allow app stores other than their own to be installed on smartphones. Self-preferential practices are to be explicitly prohibited, for example by offering consumers preferential treatment for the company's own services, thereby closing the market to smaller or new competitors. In the future, it will also no longer be permitted to combine and use data for certain purposes, as Facebook is accused of doing.

 

The new interoperability requirement is also of particular relevance to consumers. For example, messaging services that have been classified as gatekeepers will be required to permit their users to exchange messages and make video calls between different platforms (e.g., Whatsapp and Threema).


Sounds like Lex Google, Lex Apple, Lex Facebook ...


Indeed, many of the specific provisions are based on cases in which the EU Commission and the national competition authorities have taken legal action against these companies. Individual laws cannot exist, but it is of course possible to define abstract criteria for market activity in the EU in order to prevent as much problematic behavior as possible.

Certainly, it will hit the U.S. tech giants in particular with their services at the beginning: Apple's and Google's Appstore, Microsoft's Bing in addition to Google's search engine, Facebook and Whatsapp or Amazon Marketplace. The cloud computing segment of Amazon, for example, which is important for B2B and accounts for the largest share of the corporate profit, will also be affected.  

However, the extent to which the regulations will apply to European platform services such as Booking or Zalando remains unclear.


Can the regulation make the digital markets more open and fairer?


The crucial point is how the regulations will be applied and enforced in practice. So whether the agreed procedure will work as intended – including, in particular, the dialogue foreseen between the EU Commission and the “gatekeepers” concerning the regulatory measures – will be clarified in due course. Another open question is whether the envisaged collaboration between the national authorities and the EU Commission will be effective. It also remains to be seen which role the national courts will ultimately play in enforcing the DMA regulations.


The EU Commission is expected to play a significant role. What is it?


Although it has been controversial among the member states, the EU Commission is to be given a very central role. The DMA permits the Commission to order a wide variety of measures against gatekeepers. These can be behavioral measures, i.e. that a company may no longer do something specific or must do something, and structural measures such as the separation of entire business units. At the same time, the Commission is supposed to monitor compliance with the orders. All this requires the EU Commission to create numerous additional positions with specific expertise. Indeed, the EU Commission will be taking on a completely new role as a regulatory authority, and it will be interesting to see if it will ultimately be able to stand up to the big tech companies on an equal footing.



Assuming everything goes according to plan and the European Parliament and Council give their official consent, the new regulation will come into force in 2023. Can all these innovative provisions be implemented immediately?


That remains to be seen. The problem is that many technical issues that are legally relevant are not solved, but only postponed. The fine-tuning is done by means of so-called Delegated Acts, which have yet to be issued by the Commission. In reality, this can take years. One example: Until now, Deutsche Bahn has not been obliged to make real-time information about its trains available to other transport information services such as Google Maps. The relevant EU Directive governing this has been in place since 2010, but the legal details came in 2017 in a Delegated Act from the Commission. The rules were not incorporated into the German Passenger Transportation Act until 2021, and it is still not clear to what extent Deutsche Bahn will have to provide real-time information.


What else is needed?


The effectiveness of enforcement by the public sector, in this case by the EU Commission, always depends on the political impetus. And priorities can change quickly in this regard. The current Commission, with Margrethe Verstager as Digital Commissioner, has the DMA high on its list, so the rules have come surprisingly fast. But it doesn't guarantee that if there is a new Commission with a new agenda, it will continue with the same verve.



The interview was conducted by Michaela Hutterer



Personal website of Heiko Richter

Study  |  02/04/2022

Does Copyright in the Academic Sector Need to be Redefined?

In a new comparative study, Valentina Moscon and Marco Bellia examine the copyright regulations for academic publishing in Italy, Germany and the USA. In their work, they introduce well-known approaches and arrive at a proposal to make the scientific publication system fairer and more efficient.

A long-running discussion about copyright in academic publishing has shown the role of copyright and its dysfunctional effects.


The interests of commercial publishers and other information providers differ from those of academic authors, with the former usually pursuing a strategy of profit maximization, while the latter want to ensure broad access, open and timely dissemination, and reuse of scientific results. Moreover, third parties usually fund research, so academic authors do not primarily rely on income from publications – researchers publish primarily to enhance their reputation and advance their careers.


In this context, the contribution by Valentina Moscon (Max Planck Institute for Innovation and Competition) and Marco Bellia (Università Cattolica del Sacro Cuore) draws attention to new models that promise a fairer and more efficient scholarly publishing system. After reviewing the legal background in Italy, Germany, and the United States, the authors consider various possible interventions, some of which have already been adopted at the national level. These measures may be private interventions, such as university contracts and policies, or public, i.e., legislative interventions. The latter include measures outside or inside the copyright system.


“International Instrument” as a model for a fair solution


The authors conclude that the best solution is to redefine the boundaries of copyright by broadening the scope of permitted uses while defining them more precisely. This would lead to a more balanced functioning of the academic publishing system. One proposal in this direction comes from a group of copyright experts, including Valentina Moscon, who have drafted the International Instrument on Permitted Uses in Copyright Law. This instrument, conceived in the form of an international treaty, aims to create a more balanced system for the scope of international copyright protection. Among other provisions, it contains explicit rules for permissible uses in academia, including uses in the context of research, data analysis, educational purposes, and for the processing of works by libraries, museums, and archives.


To the publication:

Marco Bellia, Valentina Moscon
Academic Authors, Copyright and Dissemination of Knowledge: A Comparative Overview
Max Planck Institute for Innovation & Competition Research Paper No. 21-27

What Do Lab Disasters Tell Us about the Importance of Physical Capital in Knowledge Production?
Study  |  10/01/2021

What Do Lab Disasters Tell Us about the Importance of Physical Capital in Knowledge Production?

Prior research has largely focused on the important role of human capital in the production of knowledge. Now, a new study investigates the role of physical capital in knowledge production using lab disasters, like explosions, fires, and floods, as a natural experiment. The results provide important insights for science and innovation policy.

The authors establish the importance of physical capital in knowledge production. To this end, they exploit adverse events (explosions, fires, floods, etc.) at research institutions as exogenous physical capital shocks. Scientists experience a substantial and persistent reduction in research output if they lose specialized physical capital, that is, equipment and material they created over time for a particular research purpose. In contrast, they quickly recover if they only lose generic physical capital. Affected scientists in older laboratories who presumably lose more obsolete physical capital, are more likely to change their direction of research and recover in scientific productivity. These findings suggest that a scientist’s investments into their own physical capital yield lasting returns but also create path dependence in relation to research direction.


The study suggests that science and innovation policy should give more consideration to the role of physical capital in knowledge production.


Directly to the publication by
Stefano Baruffaldi and Fabian Gaessler
The Returns to Physical Capital in Knowledge Production: Evidence from Lab Disasters
Max Planck Institute for Innovation & Competition Research Paper No. 21-19

Decorative picture
Opinion  |  09/09/2021

Artificial Intelligence Systems as Inventors?

The question of whether an Artificial Intelligence system can or should be recognised as an inventor has been debated world-wide. The Institute has issued a position statement in view of the emerging case-law on this issue.

In particular, the position statement critically views the arguments to do so provided in a recent decision by the Australian Federal Court and highlights that they are based on questionable assumptions, first, regarding the technical capabilities of AI and, second, concerning the ostensibly positive impact of such recognition on innovation. Overall, it is emphasised that the question that should be addressed in the first place is whether inventions allegedly generated by AI should merit patent protection at all.


Position Statement

Opinion  |  09/08/2021

Artificial Intelligence Systems as Inventors?

Position Statement of the Max Planck Institute for Innovation and Competition of 7 September 2021

Miscellaneous  |  08/30/2021

Power in the Digital Realm: Verfassungsblog and Institute Host Online Symposium

Are the Digital Services Act and the Digital Markets Act suitable instruments to regulate private power in the digital arena? An Online Symposium by Verfassungsblog and the Institute addresses this question. August 30 marks the launch of a series of 15 blog posts that will bring the scientific discourse on the topic to a wider audience.

The concentration of private power in the digital realm is not tenable – on this there is transatlantic consensus. But how to regulate forms of power like power over markets or over opinion? Though there is no transatlantic consensus on suitable solutions, clear trends towards regulatory intervention are visible. With the Digital Services Act (DSA) and the Digital Markets Act (DMA) the European Commission published in December 2020 two legislative proposals that represent landmark pieces of digital policy this legislature.


On the occasion of the proposals, the Institute is joining Verfassungsblog to host an Online Symposium on the topic “To Break Up or Regulate Big Tech? Avenues to Constrain Private Power in the DSA/DMA Package“. In 15 blog posts, a diverse field of scholars discusses different facets of the topic. The contributions address a wider audience and will be published successively on the website of Verfassungsblog beginning on August 30.


All blog posts can be found here.

Max-Planck-Institut for Innovation and Competition, GI Project, Geographical Indications, GI
Study  |  08/03/2021

Protection of Geographical Indications: Further Steps in the GI Research Agenda of the Institute

Since the effects of Geographical Indications (GIs) have not been sufficiently researched so far, the Institute launched a GI Initiative in 2018. Since then, a Research Group has been investigating different approaches to the protection of GIs in the European Union and in Latin American countries.

Max-Planck-Institut for Innovation and Competition, GI Project, Geographical Indications, GI
Since 2018 a Research Group of the Institute is investigating the effects of Geographical Indications in the EU and in Latin America

Geographical Indications are designations for products from certain geographical areas that owe their quality or reputation to their geographical origin. Because they indicate specific products’ qualities, they tend to receive more attention in the market and command higher prices. Thus, Geographical Indications are important tools to promote economic development, especially in rural areas.


Despite increased attention to GIs from politics as well as from the economy, there has been little legal research on the topic so far. The Institute, which has been researching the subject for many years, in 2018 launched a research agenda that is dedicated to exploring Geographical Indications in-depth. The initiative looks in two directions: the overall functioning of the GI system in the European Union and the potential of GI systems in Latin America.


Overall EU System Assessment


A unitary protection scheme for Geographical Indications for agricultural products and foodstuffs has existed in the European Union since 1992. Two types of Geographical Indications are distinguished: So-called Protected Geographical Indications (PGIs) and Protected Designations of Origin (PDOs). Both types of designations enjoy the same scope of protection, but have different registration and maintenance requirements.


Although the European GI system has proven itself in practice, there is a need to better understand its overall functioning during the last three decades. For that purpose, a Research Team consisting of five scholars undertook a comprehensive quantitative and qualitative analysis of available data.


First, the team conducted a statistical analysis of all PGIs and PDOs registered between 1996 and 2019 under the EU protection scheme for agricultural products and foodstuffs. The data source for this analysis was the so-called “Single Document”. As the core of every protection application it includes, inter alia, a description of the definition of the geographical area, a description of the method of production and details on the so-called origin link - that is the causal link between the product and the geographical area. Further research on bakery products and potatoes from selected countries also dealt with the full specification. The research revealed a significant improvement in the quality and accuracy of information provided in these documents, in particular about the link between the geographical region and the product.


Though the requirements for obtaining GI protection and the main procedural rules are unified within the EU, the national authorities are also involved in the registration process. Further investigation on selected countries’ national rules and related procedures revealed that national approaches and idiosyncrasies could impair the functioning of a uniform protection system.


In  2018  the  European  Commission  announced  its  intention  to  extend  the  current  EU GI protection system to non-agricultural products. However, for the time being, protection for those products is only granted at the national level. In anticipation of an EU proposal, the researchers looked into some of the national protection schemes, in order to investigate whether the current EU system with its distinction of PGIs and PDOs would also be a good fit for the non-agri sector. The findings indicate that an expansion of the current system - with some procedural adaptations - might work.


As the next step of the Research Project, it is planned - in cooperation with the University of Alicante and the EUIPO - to investigate the interface between the GI system and the trademark system, including collective and certification marks.


Survey on GI Systems in Latin America


Because of their potential to promote economic and social development, quality differentiation systems are particularly important for Latin American countries. Origin-based production, including manufacturing, handicraft, and especially food production is essential to their economies, in particular, to small producers, craftspeople, and family farmers. In this regard, though many products from Latin America are well-suited for GI protection, integration of local needs, cultural tradition, and social aspects require further research. To identify other available distinctive signs, and to investigate the interface, strengths and weaknesses of each one would help to better understand the overall system.


Moreover, the fact that the protection of GIs has been increasingly the subject of Free Trade Agreements (FTAs) involving Latin American countries may restrict their leeway for the determination of national and regional policies. Thus, further investigation on FTA commitments may reveal implementation challenges at the national level.


The Institute’s “Smart IP for Latin America” (SIPLA) Initiative, launched in 2018, defined GIs as an area in need of investigation. Therefore, the first step within the SIPLA research project on “Collective Distinctive Signs” was an investigation of GIs in a comparative legal assessment of the systems of nine selected countries in the region. Because of the amount of information the team was interested in, a comprehensive questionnaire was designed by the SIPLA team and was answered by representatives from Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, Paraguay, Peru, and Uruguay. The questionnaire was focused mainly on the GI protection systems and other distinctive signs available. It included a request for information regarding national, regional and local legislation if applicable, and case law.


A comprehensive “General Comparative Report” has been built on the information obtained via the questionnaire and the analysis of the FTAs signed by the selected countries. Finally, common elements have been identified in the different national and regional systems. From those elements, at least two possible areas of research emerge to be developed in the future. The first one refers to distinctive signs different from GIs - especially signs for collective use that can benefit family farmers and small producers. The second one considers further research on GIs’ level of protection focusing on the incorporation of TRIPS standards and FTAs commitments at the national and the regional level.


More information on the Research Initiative can be found in the ePaper of the actual Activity Report.