The Innovator’s Defense Fund: What it is and why it’s needed
By Adam Thierer and Eli Dourado
What happens when innovators clash with outdated, legacy regulations? Sometimes the innovators can lobby to repeal or relax the old rules, but increasingly, they have to take a different approach — willfully disobeying regulations in order to force a re-evaluation. Uber is the classic example, yet seemingly exponential growth in a diverse array of highly disruptive technologies — drones, driverless cars, 3D printing, Bitcoin, the Internet of Things, advanced medical devices, etc. — may force innovators to deploy a willful-disobedience strategy more often.
To support continuous innovation in the face of the past century’s mountainous accumulation of regulatory red tape, we need an “Innovator’s Defense Fund,” a non-profit law firm or legal fund tasked with defending innovators whose entrepreneurial efforts are stifled by government opposition.
In his recent book, “By the People: Rebuilding Liberty Without Permission,” Charles Murray proposes the creation of a “Madison Fund,” or “a private legal-aid foundation to provide … legal assistance to ordinary Americans who are being victimized by the regulatory state.” Murray’s Madison Fund would build on the work of existing public interest law firms, such as the Institute for Justice and the Pacific Legal Foundation, but go even further. It would support a more broad-based legal defense effort “to defend people who are innocent of the regulatory charges against them” while also highlighting the burdensome cost of regulations more generally and raise public awareness of how often agencies harass average citizens.
We need a variant of Murray’s Madison Fund, more narrowly targeted to the realm of technological innovation. Flush with cash, the biggest names in the tech world are typically skilled at mounting their own legal defense against overbearing regulatory intrusions because they already have small armies of lawyers on staff. Smaller innovators — think of startups — don’t have the same luxury.
Neither startups nor average Americans who experiment with new technologies on their own, an increasingly common occurrence with modern technologies, are capable of standing up against the Goliath state. Even the simple threat of regulatory action can fully derail their entrepreneurial efforts. A legal defense fund is essential for these technological innovators.
An Innovator’s Defense Fund would ensure that small innovative companies and individuals have the legal assistance necessary to defend themselves against regulatory bodies or, more likely, in the courts.
An Innovator’s Defense Fund will only be successful and sustainable if it is independently funded. Ideally, the board of directors would consist of a group of philanthropists who share a belief in the importance of technological innovation as the driving force behind human prosperity.
There are two basic models for such a fund: In a low-overhead model, the board of directors would make all resource allocation decisions and hire a couple full- or part-time staff members to process incoming requests for assistance. The board could determine which cases were worthy of support and then direct staff to hire law firms or specific legal advocates to take on those cases. In a full-service model, the board would fund the creation of a public interest law firm consisting of numerous full-time attorneys and other support staff, who would determine which cases to take on. The staff might also devise media strategies to defend the innovators in the court of public opinion.
Consider a few hypothetical cases the fund might support:
- A group of volunteers using 3D printers to create cheap (or free) prosthetic limbs encounters resistance from Food and Drug Administration regulators because the products didn’t go through the typical FDA review process.
- A smartphone app developer finds itself in hot water with the FDA or Federal Trade Commission for creating a new diagnostic tool that lets users compile personal health data and then make medical or dietary recommendations.
- A group of individuals using drones for search-and-rescue operations in an emergency is harassed by the Federal Aviation Administration because they didn’t have prior approval.
- State attorneys general target leaders of an open-source blockchain cryptocurrency project for enabling noncompliance with anti-money laundering laws.
- A new sharing economy start-up encounters barriers to entry at the state or local level which make it impossible from them to challenge existing incumbent operators.
In each case, the fund would help these innovators mount a legal defense and get the word out about their plight.
By defending the right to innovate even when it goes against anachronistic laws or overbearing prosecutors, an Innovator’s Defense Fund can act as a catalyst for dynamic new products and services that would otherwise languish under the heavy yoke of excessive government regulation. Giving innovators confidence in the fact that they aren’t standing alone is essential if we hope to boost global competitiveness, spur economic growth, and achieve long-term prosperity.
Adam Thierer (@adamthierer) is a senior research fellow with the Technology Policy Program at the Mercatus Center at George Mason University. Eli Dourado (@elidourado) is a research fellow and director of the Technology Policy Program at the Mercatus Center at George Mason University.
