General Innovation Competitions

GENERAL INNOVATION COMPETITIONS Jason Reinecke* CITE AS: 21 STAN. TECH. L. REV. 128 (2018). ABSTRACT The extensive patents-versus-prizes literature has thus far focused on specific competitions—competitions that reward inventions based on how well they solve a narrow, predetermined problem. However, prize competitions do not have to specify the problem to be solved in such great detail. Indeed, the degree by which prize competitions specify the problem to be solved falls along a spectrum, with completely general competitions that permit submission of any innovation under the sun falling on one end of the spectrum, and highly specific competitions that lay out the problem to be solved in painstaking detail falling on the other end. This Article makes three primary contributions to the innovation literature. First, this Article analyzes and discusses prize competitions of various degrees of generality, and in particular tackles theoretical considerations related to where prize competitions fall along this spectrum of generality. Second, this Article highlights key factors to consider when designing these unexplored general innovation competitions. Third, this Article provides survey data collected from participants of more general innovation competitions regarding their subjective evaluations of whether and how general innovation competitions affected their innovative activity. *Stanford Law School, J.D. expected 2018. I am especially grateful to Professor Lisa L. Ouellette for all of her mentorship, support, and helpful comments. Thanks to Professor Michael Abramowicz, Professor Barbara Fried, Professor Bernadette Meyler, Brendyn Reinecke, and the Stanford Law students in the Spring 2017 Legal Studies Workshop for their helpful comments. Special thanks to all of the innovation competition administrators for speaking with me about their competition and for sending out the surveys (their names will remain anonymous to preserve the anonymity of the schools surveyed). This Article is dedicated to my grandfather, Judge William “Bill” Reinecke (1930-2017), for, among other things, helping intro- duce me to the law, golf, and card games. The opinions expressed are solely my own. 128 Winter 2018 GENERAL INNOVATION COMPETITIONS 129 TABLE OF CONTENTS I. INTRODUCTION… ................................................................................... 129 II. GENERAL PRIZE COMPETITIONS COMPARED TO OTHER INNOVATION INCENTIVES…….. .................................................................................... 132 A. The Need to Incentivize Innovation .................................................... 132 B. General and Specific Innovation Competitions in Practice ................ 133 C. Comparing Innovation Incentives ....................................................... 140 1. Who Decides the Size of the Reward and the Projects to Pursue? 140 2. When Will the Reward be Provided? ............................................ 142 3. Nonmonetary Considerations ...................................................... 147 4. Racing ........................................................................................... 149 5. The Adverse Selection Problem ..................................................... 151 6. Other Innovation Incentives ......................................................... 152 III. OPTIMAL DESIGN OF GENERAL COMPETITIONS ............................... 153 A. The Size and Distribution of the Reward ............................................ 154 1. Optimal Size of the Reward .......................................................... 154 2. Optimal Distribution of the Reward ............................................ 155 3. Reward Size in Practice ................................................................ 156 B. The Eligible Class of Participants ....................................................... 157 1. Size of the Class ............................................................................ 157 2. Characteristics of the Class........................................................... 159 C. Valuable Nonmonetary Opportunities ................................................ 160 IV. ANALYZING GENERAL COMPETITIONS WITH SURVEY DATA ........... 161 A. Data as a Whole ................................................................................... 163 B. Individual Surveyed Competitions ...................................................... 165 1. Competition #1 ............................................................................. 165 2. Competition #2 ............................................................................. 165 3. Competition #3 ............................................................................. 166 V. CONCLUSION…… ................................................................................... 166 I. INTRODUCTION Innovation Inducement Prize competitions are designed to spur innovation, though they vary significantly in the degree by which they specify the problem to be solved. At one end of this spectrum are general innovation competitions that permit submission of any innovation or startup under the sun. At the other end are highly specific competitions that describe the problem to be solved in painstaking detail. A prize competition’s place along the spectrum of generality has numerous implications regarding how it spurs innovation. In spite of this flexibility, the extensive patents-versus-prizes literature has thus far focused on specific competitions.1 1. See, e.g., THOMAS KALIL, BROOKINGS, PRIZES FOR TECHNOLOGICAL INNOVATION 2 (2006), https://www.brookings.edu/wp-content/up- loads/2016/06/200612kalil.pdf [https://perma.cc/W25B-ZMLZ] (“One cur- rently underutilized tool for stimulating technological innovation is inducement 130 STANFORD TECHNOLOGY LAW REVIEW Vol. 21:1 Prize competitions in practice fall all along the spectrum of generality. For instance, the George Mason Dean’s Business Competi- tion is very general, “welcome[ing] ventures and organizations in all industries [and] sectors.”2 For the University of Wisconsin-Madison Transcend Madison competition, “[a]ll you need is an idea to com- pete.”3 Minnesota residents with any startup idea4 are eligible to par- ticipate in the MN Cup,5 the largest statewide startup competition in the country.6 Conversely, the Ansari X PRIZE was rather specific, incentiv- izing the creation of “a reliable, reusable, privately-financed, manned spaceship capable of carrying three people to 100 kilometers above the Earth’s surface twice within two weeks.”7 The 2016-17 Stanford Center on Longevity Design Challenge fell somewhere in between, of- fering $17,000 in prizes to teams creating inventions adhering to a general “Innovating Aging in Place” theme.8 Similarly, the Michigan Innovation in Action competition offers prizes for inventions pertain- ing to one of two tracks, public health and education.9 Because prize competitions are so flexible with respect to the degree by which the competition specifies the problem to be solved, and because prize competitions in practice fall all along this spectrum, it is unfortunate that the literature has focused only on specific prize prizes, which encourage efforts by contestants to accomplish a particular goal.”); Daniel J. Hemel & Lisa Larrimore Ouellette, Beyond the Patents–Prizes Debate, 92 TEX. L. REV. 303 (2013) (generally describing prizes as in consideration for solving a specific problem); Amy Kapczynski, Commentary: Innovation Policy for a New Era, 37 J.L. MED. & ETHICS 264, 265 (2009) (defining a prize system as one that rewards “inno- vators who meet specified outcomes.”); Heidi Williams, Innovation Inducement Prizes: Connecting Research to Policy, 31 J. POL’Y ANALYSIS & MGMT. 752, 754 (2012) (“I fo- cus on ‘targeted’ prizes that request solutions to prespecified problems, in contrast to ‘blue-sky’ prizes (such as Nobel Prizes) granted to inventors for innovations that were not specified in advance.”). 2. Deans’ Business Competition, GEORGE MASON UNIV., http://business.gmu.edu/blog/buzz/2017/04/03/2017-deans-business-competition-work- shops-april-5th/ [https://perma.cc/2LV5-LVQX]. 3. Guidelines and Regulations, UNIV. OF WIS.-MADISON, http://transcend.engi- neering/guidelines [https://perma.cc/V3WP-47TP]. 4. Participants are broken into one of eight divisions for the MN Cup, though one of these divisions is “general.” Enter the Competition, UNIV. OF MINNESOTA, https://carlsonschool.umn.edu/mn-cup/enter-the-competition [https://perma.cc/CUZ8-VELK]. 5. For a brief history of the MN Cup, see History of the MN Cup Competition, YOUTUBE, https://www.youtube.com/watch?v=wvtUYyCLt1s [https://perma.cc/C4DP-D8ZR]. 6. MN Cup, UNIV. OF MINNESOTA, https://carlsonschool.umn.edu/mn-cup [https://perma.cc/X4TW-G7VF]. 7. ANSARI XPRIZE, https://ansari.xprize.org/ [https://perma.cc/8CY9- 56CK]. 8. 2016-2017 Design Challenge, STAN. CTR. ON LONGEVITY, http://longevity.stanford.edu/designchallenge2016-17 [https://perma.cc/V6WL-J3AT]. 9. Team Eligibility, UNIV. OF MICH. INNOVATION IN ACTION, http://innova- tioninaction.umich.edu/teams/eligibility.html [http://perma.cc/T4LW-M7RD]. Winter 2018 GENERAL INNOVATION COMPETITIONS 131 competitions. This Article fills this void in the literature by discussing three important questions regarding prize competitions and the degree by which they specify the problem to be solved. First, in Part I, this Ar- ticle analyzes and discusses prize competitions of various degrees of generality and compares them to other innovation

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