The Economic Structure of Intellectual Property Law

449 Pages·2003·1.45 MB·English

by  The Honorable Richard A. Posner, William M. Landes

The Economic Structure of Intellectual Property Law
The Economic Structure of
Intellectual Property Law
William M. Landes
Richard A. Posner
The Belknap Press of
Harvard University Press
Cambridge, Massachusetts, and London, England 2003
Copyright © 2003 by the President and Fellows of Harvard College
All rights reserved
Printed in the United States of America
Library of Congress Cataloging-in-Publication Data
Landes, William M.
The economic structure of intellectual property law /
William M. Landes, Richard A. Posner.
p. cm.
Includes bibliographical references and index.
ISBN 0-674-01204-6
1. Intellectual property—United States.
2. Intellectual property—Economic aspects.
I. Posner, Richard A. II. Title.
KF2979.L36 2003
346.7304′8—dc21 2003050882
Contents
Introduction 1
1 The Economic Theory of Property 11
2 How to Think about Copyright 37
3 A Formal Model of Copyright 71
4 Basic Copyright Doctrines 85
5 Copyright in Unpublished Works 124
6 Fair Use, Parody, and Burlesque 147
7 The Economics of Trademark Law 166
8 The Optimal Duration of Copyrights
and Trademarks 210
9 The Legal Protection of
Postmodern Art 254
10 Moral Rights and the Visual Artists
Rights Act 270
11 The Economics of Patent Law 294
12 The Patent Court:
A Statistical Evaluation 334
13 The Economics of Trade Secrecy Law 354
14 Antitrust and Intellectual Property 372
15 The Political Economy of Intellectual
Property Law 403
vi Contents
vi
Conclusion 420
Acknowledgments 425
Case Index 427
Author Index 430
Subject Index 435
Introduction
Awareness that intellectual property raises distinctive economic issues long
predates the modern law and economics movement. By “intellectual prop-
erty” we mean ideas, inventions, discoveries, symbols, images, expressive
works (verbal, visual, musical, theatrical), or in short any potentially valu-
able human product (broadly, “information”) that has an existence separable
from a unique physical embodiment, whether or not the product has actually
been “propertized,” that is, brought under a legal regime of property rights.
Intellectual property as we are defining it is ancient in origin; trademarks in
their approximate modern sense, as indicators of the source of traded goods,
were in common use in ancient Rome.1 Even the “modern” idea that proper-
tizing intellectual property may be necessary if there are to be adequate in-
centives to create it dates back to the Middle Ages. The landmarks in its
history include the Venetian Patent Act of 1474, the English Statute of Mo-
nopolies of 1624, the petition of the English Stationers’ Company to Parlia-
ment in 1643,2 the Statute of Anne (the English Copyright Act of 1710),3
the patent and copyright clause of the U.S. Constitution of 1787,4 the U.S.
patent and copyright statutes of 1790, and the French Patent Act of 1791.
Economic analysis of intellectual property can be dated to brief discussions
by Smith, Bentham, Mill, and other classical economists and by early twenti-
eth-century economists such as Pigou, Taussig—and perhaps most notably
1. See Abraham S. Greenberg, “The Ancient Lineage of Trade-Marks,” 33 Journal of the Pat-
ent Office Society 876, 879–880 (1951).
2. See Arnold Plant, “The Economic Aspects of Copyright in Books,” in Plant, Selected Eco-
nomic Essays and Addresses 57, 65–67 (1974 [1934]).
3. 1709 according to the calendar then in use; 1710 according to the modern calendar. See
Lyman Ray Patterson, Copyright in Historical Perspective 3 (1968).
4. Authorizing Congress 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.” U.S. Const., art. I, § 8, cl. 8.
1
2 The Economic Structure of Intellectual Property Law
2
Arnold Plant, who published pathbreaking articles on patents and copyrights
5
in the 1930s.
But it was not until the 1970s that sustained publication of economic anal-
yses of the various forms of intellectual property began. Since then the litera-
6
ture has ballooned. This is a reflection of the growth of economic analysis of
law generally, the growing importance of intellectual property in the national
and world economy, and a powerful movement, again both national and in-
ternational, for expanded rights over such property; this movement has re-
sulted in a number of legislative, executive, and judicial initiatives discussed in
this book. Throughout the 1970s and well into the 1980s (and in some quar-
7
ters into the 1990s), there was a widespread belief in the United States that
the nation was in decline, that it was being outcompeted by other nations,
particularly Japan, and that the decline could be halted only by a renewed
emphasis on technological innovation as a stimulus to economic growth. An
era of rapid legal change began in 1976 with a major overhaul of the copy-
right law by Congress. Of particular significance for judicial policy was the
creation in 1982 of the U.S. Court of Appeals for the Federal Circuit, which
was given a monopoly of appeals in patent cases.
Here are some of the fruits of the new emphasis on technological innova-
tion and the growing enthusiasm for intellectual property rights generally.
Between 1985 and 2001 the annual number of patents issued by the U.S.
8
Patent and Trademark Office increased from 111,000 to 269,000. Over the
same period the percentage of federal civil cases involving disputes over intel-
9
lectual property doubled. Between 1980 and 2001 membership in the Intel-
lectual Property Section of the American Bar Association grew from 5,526 to
21,670—and the growth in just the last five years of that period was 39 per-
cent, exceeding all categories other than the closely related “Science and
5. See Plant, note 2 above, and Plant, “The Economic Theory concerning Patents for Inven-
tions,” in id. at 35. See generally Gillian K. Hadfield, “The Economics of Copyright: An Histori-
cal Perspective,” 38 Copyright Law Symposium 1 (1992).
6. For a useful survey, see Peter S. Menell, “Intellectual Property: General Theories,” in Ency-
clopedia of Law and Economics, vol. 2: Civil Law and Economics 129, 130–156 (Boudewijn
Bouckaert and Gerrit De Geest eds. 2000).
7. See, for example, Lester Thurow, Head to Head: The Coming Economic Battle among Ja-
pan, Europe, and America (1992).
8. See U.S. Patent and Trademark Office, “U.S. Patent Activity 1790–Present,” http://www.
uspto.gov/web/offices/ac/ido/oeip/taf/reports.htm (utility patents only, granted to U.S. residents
only). The rate of growth in the number of trademarks and copyrights is similar. For more de-
tailed patent statistics (also limited, however, to utility patents issued to U.S. residents), see Ta-
ble 12.2 in Chapter 12, and for copyright statistics, see Figure 8.2 in Chapter 8.
9. “United States District Courts—National Judicial Caseload Profile,” in Administrative
Office of the U.S. Courts, Federal Court Management Statistics (1974–2000).
Introduction 3
3
Technology.” The number of law journals specializing in intellectual prop-
erty, technology, and art has risen from two in 1980 to twenty-six today, and
while in 1981 the University of Chicago Law School offered seven courses or
10
seminars in tax and one in intellectual property, the ratio is now five to five.
Economic journals published five articles in 1982 whose titles contained
11
terms indicating intellectual property and 235 in 2000. Between 1980 and
2000 the average annual growth rate of scientific and engineering employ-
ment in the United States was 4.9 percent, more than four times the overall
12
annual growth rate in employment, while between 1983 and 2000 the
number of persons employed as authors rose at an annual rate of 8.7 percent
13
and as designers at an annual rate of 9.2 percent. And between 1987 and
1999, a period of only twelve years, annual U.S. receipts from foreign trade
in intellectual property rose from $10 billion to $36.5 billion, versus U.S.
payments to foreign owners of intellectual property in 1999 of only $13 bil-
14
lion.
The figure of $36.5 billion may seem meager in light of frequent claims
that intellectual property is America’s biggest export. U.S. exports of high-
technology products such as computers and electronic equipment amounted
15
in 1998 to $190 billion out of total exports of $690 billion (28 percent)
and exports of copyright-based industries including films and computer soft-
16
ware were $89 billion in 2001. But of course these figures include a great
deal of hardware (such as computers and CDs) as well as the intellectual
property that is embodied in or sold with the hardware. Nevertheless it is ap-
parent that intellectual property is a large and growing part of the U.S. econ-
omy in general and of U.S. foreign trade in particular.
Our own collaborative work on intellectual property began in the mid-
1980s, with articles on the economics of trademark law and copyright law, at
10. University of Chicago Law School, Announcements (1981–2001).
11. Computed from OCLC FirstSearch: Advanced Search for “Intellectual Property,”
“Copyright,” “Patent,” and “Trademark,” in EconLit., http://newfirstsearch.oclc.org (visited
Aug. 12, 2002).
12. See National Science Foundation, “Science and Engineering Workforce: Profile of the
U.S. S&E Workforce,” http://www.nsf.gov/sbe/srs/seind02/c3/c3s1.htm.
13. U.S. Bureau of the Census, Statistical Abstract of the United States: 2000, at 416, tab.
669.
14. National Science Foundation, “Science and Engineering Indicators: 2002,” tab. 6.1,
http://www.nsf.gov/sbe/srs/seind02/append/c6/at06-01.xls; National Science Foundation, “In-
dustry, Technology and the Global Marketplace: U.S. Technology in the Marketplace,” tab. 6.6,
http://www.nsf.gov/sbe/srs/seind02/c6/c6s1.htm. All these export figures are in 1997 dollars.
15. See id.
16. See Stephen E. Siwek, Copyright Industries in the U.S. Economy: The 2002 Report 6
(2002).