1. An Introduction to Intellectual Property & Economics
Class Notes: January 17, 2003
Law 507 | Intellectual Property | Spring 2003
Professor Wagner

2. Today’s Agenda The Basic Economics of Intellectual Property
Intellectual Property & the Information Economy
Thoughts on Economic analysis of IP
1/17/03
Law 507 | Spring 2003

3. The Economic Basis of IP
U.S. Constitution, article I, § 8, cl. 8:
[to] promote the Progress of Science and useful Arts by securing for limited Times to Authors and Inventors the exclusive right to their respective Writings and Discoveries.
Ours is a Utilitarian approach: granting rights as a means to achieve social benefits.
1/17/03
Law 507 | Spring 2003

4. The Economic Basis of IP
But why give rights in information, invention, or expression?
IP is intended to solve a public goods problem
INS v AP, 248 U.S. 215 (1918)
[ Note: technological change interferes with established proprietary rights ]
Protection of “hot news” as quasi-property (why?)
Hot news as a public good:
Non-rival
Non-extinguishable
1/17/03
Law 507 | Spring 2003

5. The Economic Basis of IP
INS v AP, 248 U.S. 215
What are the benefits of granting a property right in hot news?
What are the costs?
What is the “net”? (Benefits - costs = Net)
What else would you want to know?
What are the boundaries of the right established by the majority?
Can you read the early paper and call the West Coast to discuss the news?
Can you read the early paper and follow-up on the story?
Consider institutions: is the judiciary the best institution (or an adequate one) to conduct this analysis?
1/17/03
Law 507 | Spring 2003

6. Intellectual Property and the Information Economy
Barlow: The Economy of Ideas, Wired, Mar. 1994
Why is the shift from tangible ‘containers’ to intangible ones critical to Barlow? (What changes, exactly?)
Does the justification/need for IP rights increase or decrease with:
Lower costs of distribution and communication
Increasing velocity of information diffusion
How does Barlow suggest artists/inventors get paid? (Hint, think about his experience?)
Will it work systematically, or only under certain conditions?
In Barlow’s regime, who is vulnerable?
1/17/03
Law 507 | Spring 2003

7. Intellectual Property and the Information Economy
Barlow: The Economy of Ideas, Wired, Mar. 1994
What does Barlow suggest will (and should) replace intellectual property law?
Encryption: law? Or something else?
Anything ironic about this?
Is he right: are IP laws a “sinking ship” in the Internet context?
1/17/03
Law 507 | Spring 2003

8. Economic Analysis of Intellectual Property
The Economic mechanism:
IP rights => rights to exclude others
Allows price to be set above marginal cost
Note that marginal cost of information = 0
Returns allow recovery of investments, incentives
Economic costs:
Deadweight loss (reduced production)
Less diffusion of information
Races and rent-seeking
Note that IP rights are not often “monopolies”
In some circumstances, perhaps
1/17/03
Law 507 | Spring 2003

9. Economic Analysis of Intellectual Property
The Basic Economic Challenge: Balancing Benefits vs Costs
1/17/03
Law 507 | Spring 2003

10. Requirements for Copyrightability
Next Class
Copyright I
Copyright Basics
Requirements for Copyrightability
Reading Notes:
Page proofs, not book
1/17/03
Law 507 | Spring 2003