1. An Introduction to Intellectual Property & Economics Class Notes: January 15, 2004 Law 507 | Intellectual Property | Spring 2004 Professor Wagner

2. 1/15/042Law 507 | Spring 2004 Today’s Agenda 1. An Overview of Intellectual Property 2.The Basic Economics of Intellectual Property 3.Intellectual Property & the Information Economy 4.Thoughts on Economic Analysis of IP

3. 1/15/043Law 507 | Spring 2004 An Overview of Intellectual Property 1.Copyrights Works of authorship - literary and artistic expression 2.Patents Inventions - innovative ideas embodied in goods or services 3.Trademarks / Trade Dress Protects advertising or marketing efforts oWhy would we want to stimulate this? 4.Trade Secrets (or unfair competition) Protect against ‘unfair’ appropriation of commercial information oWhy would you want to do this?

4. 1/15/044Law 507 | Spring 2004 An Overview of Intellectual Property CopyrightPatentTrademark Works Literary & artistic works Process, machine, composition of matter Distinctive ‘marks’ or appearance Standard Originality, authorship, fixation Novelty, Nonobviousness, Utility Distinctiveness, secondary meaning Acquisition Automatic; registration for remedies Application process Registration + use at Federal level Law 17 U.S.C. et seq; exclusively federal 35 U.S.C. et seq; exclusively federal; Appeals to Fed Cir 15 U.S.C. et seq; plus state laws Term Life of author + 70 years 20 years from application for patent Perpetual, subject to abandonment

5. 1/15/045Law 507 | Spring 2004 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.

6. 1/15/046Law 507 | Spring 2004 First Question: Why Economics? IP rights: rights in intangible goods How are these rights justified? Natural Rights / Lockean Rights Natural Rights / Lockean Rights Labor-mixing justification Personhood Theory Personhood Theory Ownership / use of property as the basis of one’s person Utilitarian Theory Utilitarian Theory IP rights as a means to promote overall welfare

7. 1/15/047Law 507 | Spring 2004 The Utilitarian / Economic Basis of IP Rights Why do we need IP rights? Innovation/expression are public goods oNon-rival oNon-extinguishable Absent protection, will be underproduced (why?) oDo you agree? Does it depend upon the type of intellectual good? oDoes this suggest that ‘more is better’? That more protection = more goods? Always?

8. 1/15/048Law 507 | Spring 2004 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) redux: [ Note: technological change interferes with established proprietary rights ] Protection of “hot news” as quasi-property (why?) Hot news as a public good: 1.Non-rival 2.Non-extinguishable

9. 1/15/049Law 507 | Spring 2004 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) oWhat else would you want to know? What are the boundaries of the right established by the majority? oCan you read the early paper and call the West Coast to discuss the news? oCan 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?

10. 1/15/0410Law 507 | Spring 2004 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: oLower costs of distribution and communication oIncreasing velocity of information diffusion How does Barlow suggest artists/inventors get paid? (Hint, think about his experience?) oWill it work systematically, or only under certain conditions? oIn Barlow’s regime, who is vulnerable?

11. 1/15/0411Law 507 | Spring 2004 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? oEncryption: law? Or something else? oAnything ironic about this? Is he right: are IP laws a “sinking ship” in the Internet context?

12. 1/15/0412Law 507 | Spring 2004 Economic Analysis of Intellectual Property The Economic mechanism: IP rights => rights to exclude others Allows price to be set above marginal cost oNote 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

13. 1/15/0413Law 507 | Spring 2004 Economic Analysis of Intellectual Property The Basic Economic Challenge: Balancing Benefits vs Costs

14. 1/15/0414Law 507 | Spring 2004 Next Class Copyright I Copyright Basics Requirements for Copyrightability