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What Effects Do Legal Rules Have on Service Innovation


Intellectual property, contract, and tort laws likely have effects on levels of innovation in service sectors of the economy. Legal rules that are too strong or too strict may discourage investment in service innovation; yet, rules that are too weak or too loose may result in suboptimal investments in sound innovation. Intellectual property protections have traditionally been quite strong in protecting innovation in manufacturing sectors, but much less so in service sectors. Services have, for example, traditionally been unpatentable because they were perceived to be non-technological. Whether digital information services, such as web services, should be patentable is currently unsettled and highly controversial. Contract and tort rules are currently quite strict as to manufactured goods, but less so as to services. The emergence of digital information services raises questions about whether existing contract and tort rules governing goods or services should be applied to them, or whether some new legal rules are needed to promote innovation in digital information services and social welfare more generally.

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