Friday, October 06, 2006

An Introduction to the Big Tent Theory of Intellectual Property

According to Professor Richard Epstein's keynote address at the The Progress & Freedom Foundation's 2006 Aspen Summit entitled "The Structural Unity of Real and Intellectual Property," there is one obvious difference between real property and intellectual property that helps explain the key trade-offs between rewarding creation and protecting dissemination:

In the real estate situation, if the law creates strong and perpetual rights, it's not going to hamper the dissemination, because the current owner will have all the proper incentives to decide whether to keep it or to sell the underlying asset. The party who values it most will end up its sole owner. In patents
and copyrights (but not other forms of IP), if the law bestowed perpetual rights, the exclusionary costs at the back-end are much higher than with real estate because they eliminate the right of other individuals to use those ideas when the marginal cost of the additional use is zero. To be sure, if licenses could be negotiated at zero cost, the usual Coasean solution would
apply. It would not matter how long the patent or copyright lasted, for the initial legal decision would only have a wealth effect, not an allocative one. But the one point on which there is no disagreement is that these transactions costs are never

How then should the law take that powerful truth into account? Well, I think the simplest approach is to try to manipulate one and only one variable from the legal regime that governs land
and chattels, and that's duration. With copyright, the relevant
period clearly ought to be longer than it is for patents, because no matter how rapidly technological innovation comes, nobody would have been able in the fullness of time to write the Beatles' Help from scratch. That song, like all others, is and will remain unique. In contrast, with the laser, Charlie Townes invented it, but, given the pace of technical knowledge, within two or three years somebody else would have invented it anyhow.

The patent system moves the whole cycle of innovation forward, so that the closeness of a patent race does not measure the positive innovative effects of the system. Remember, Elisha Gray lost the telephone patent by an eyelash. Had fate intervened, you’d have had the Gray Telephone Company instead of the Bell Telephone Company if he had filed the day before. So if the durability of patents and copyrights reflected this fundamental difference, we would shorten the copyright from its outsized duration today, and paradoxically,
particularly with respect to pharmaceuticals where patented products are mired in FDA deliberations, lengthen the term for patents.

But when the dust settled patents would always have a shorter duration than copyright. The ability to focus as much
of the difference in various forms of property rights to the single variable of duration can only strengthen the parallels that exist across fields on other key attributes. Of course, this point has some unavoidable oversimplification given the problem that the patent law faces with matters of claim definition where the law cannot survey a patentable domain by metes and bounds. But with common sense and some patience, those issues can also be handled.

I'm not going to introduce the special rules governing the doctrine of equivalents and derivative work at this late moment. I shall just conclude by noting that the key issues on boundaries in intellectual property have some instructive parallels in the law of real property. But those weighty matters will have to wait for another day. Jim DeLong paid me a high compliment when he called me a big tent theorist.

The Progress & Freedom Foundation is a market-oriented think tank that studies the digital revolution and its implications for public policy. Click here to see a complete list of all their works on Intellectual Property.

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