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38 JREG Bulletin 1 (2020-2021)

handle is hein.journals/jregb38 and id is 1 raw text is: Regulation and Innovation: Approaching Market Failure from Both Sides Yafit Lev-Aretz' & Katherine J. Strandburg Regulation is often claimed to be the enemy of socially desirable in- novation because of factors including innovation's unpredictability and regulation's compliance costs. In this essay, we bring two intellectual property scholars' perspectives to bear on the question of regulation's impact on innovation. We offer a novel, yet intuitive, analytical frame- work that takes both market demand failures, and failures of supplier ap- propriability into account. Traditionally, regulation seeks to mitigate market failures that create deviations between the demand portfolio per- ceived by suppliers and the socially optimal demand portfolio. Studies of the interplay between regulation and innovation have mostly taken this perspective, considering the impact of various regulatory transaction and compliance costs on innovation. Intellectual property law and competi- tion law target a different sort of problem, where markets fail to supply products and services at competitive prices or to undertake innovative ac- tivities because of supplier appropriability issues. We argue that these demand-misalignments and appropriability fail- ures, though analytically distinct and commonly treated separately, work in parallel to determine the extent to which the market's portfolio of in- novative activity is socially suboptimal. Discussing the relationship be- tween regulation and innovation in terms of demand misalignment, ap- propriability failures, and the mutual influence they bear on each other, opens up a new way of understanding this long debate. Our analysis shows the futility of sweeping generalizations about the relationship be- tween regulation and innovation and highlights the crucial role of regula- tory design. 7 Assistant Professor of Law, Zicklin School of Business, City University of New York. This Ar- ticle was co-authored during Professor Lev-Aretz's Post-Doctoral Fellowship at the Information Law Institute (ILI) at New York University School of Law. ILI Fellowships are funded in part by a generous grant from Microsoft Corporation. Alfred B. Engelberg Professor of Law and Faculty Director, Information Law Institute, New York University School of Law. Professor Strandburg acknowledges the generous support of the Filomen D. Agostino and Max E. Greenberg Research Fund. The authors are also grateful for the terrific research assistance from Grace Ha, Melissa Arseniuk, Christopher Bettwy, Gabriel Ferrante, Melodi Dincer, and Sara Spaur, and for the helpful comments from members of the NYU Privacy Research Group and Information Law Institute, attendees at the Privacy Law Scholars Conference 2017, NYU faculty workshop attendees, and New York Law School faculty workshop attendees. 1

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