Using prizes to spur innovation and government savings

New report by R-Street: “In myriad sectors of the U.S. economy, from military technology to medical care, the federal government serves as the single-largest spender. As such, many of the innovations, inventions and discoveries that could propel economic growth in the future also would have a direct and measurable impact on federal spending.

To offer an incentive to research and development that yields significant taxpayer savings, we propose an “innovation savings program” that would serve as an alternative to the traditional patent system. The program would reward teams or individuals who develop discoveries or technologies that produce federal budget savings. In effect, a portion of those savings would be set aside for the discoverers. To be eligible for these rewards, the researchers and inventors would not receive patents on their discoveries or processes.

This perpetual, self-funded federal prize system would be based, in part, on the successful False Claims Act and Medicare Recovery Audit programs. Payouts would be administered by an independent or executive agency, verified by the Government Accountability Office and overseen by Congress to ensure fair and effective implementation.

New technologies developed through this process would be available immediately for generic commercialization, free of royalty fees. This could encourage innovation in sectors where patents and traditional research spending have lagged, while also bringing those innovations to market more quickly and affordably. Prize systems of this type have been in operation in the United States for more than 150 years, in the form of the False Claims Act, and date back to “qui tam” actions from the 13th century, thus predating the patent system by several hundred years. (Download PDF)