Intellectual Property Law

Intellectual Property Law

Description

This chapter describes the provisions of American law that create exclusive rights in the fruits of the intellect, principally inventions, designs, writings, technical know-how, and marketing symbols. These laws include patent law, which protects inventions and designs; copyright law for the protection of writings; trademark law for marketing symbols; and state trade secrecy and contract law for the protection of know-how. Collectively, these are referred to as ‘intellectual property law’. However, it is important to stress from the outset that, although this phrase uses the word ‘property’, this branch of the law is very different from the law that deals with tangible property. There are at least three features that highlight the differences between tangible and intangible property law. One has to do with supply. Much of property law deals with natural resources, such as land and minerals. These are fixed: there is, for instance, a finite amount of land on the globe and no way to replace a piece that is despoiled. The law of tangible property, therefore, is partly aimed at encouraging creative management and conservation. There are, however, infinite possibilities for new ideas and no need to conserve them for the future. To the contrary, one innovation can open doors to many others, so that the sooner and more fully an idea is discovered and utilized, the faster the knowledge base expands. This interrelatedness is the second feature that distinguishes the laws of tangible and intangible property. With regard to natural resources, demand and supply are in some ways discrete concepts. For example, using zinc cannot increase the world's supply of zinc. But using ideas does create more ideas. The cumulative nature of innovation means that intellectual property law must be fashioned with an eye toward the duality of ideas as input and output. It must be structured to simultaneously reward the producer of an invention and protect other inventors' access to the building blocks of knowledge. The third, and most important, difference between tangibles and intangibles has to do with the ability to share. Tangible property lawyers talk about the ‘tragedy of the commons’. If, for example, every farmer has the right to graze sheep on a piece of land, the grass will be chewed to its roots. When the grass dies, all the sheep starve. Establishing exclusive rights to property solves the problem because private ownership gives individual farmers the ability and incentive to graze the flock in a manner that maintains the grass. There is, however, no tragedy of the commons with regard to intellectual property because it can be shared. That is, once an invention is perfected, or a manuscript completed, the creator's ability to use it for its intended purpose—to read a research report, or to operate a machine—is usually not diminished by the use made of that same invention by others. Instead, as each utilizer enjoys the benefits of the innovation (and as each utilizes the invention as a source for other ideas), social welfare increases. The effect, then, of creating substantial rights in intellectual property appears to be a social disutility. These rights are, after all, essentially monopolies in that they control the ‘supply’ of a product, in this case, information. Like other monopolies, they have the potential for raising prices and lowering output. In addition, they can produce deadweight social loss as people who could profitably use the innovation, were it priced competitively, forgo purchasing it at the monopolist's price. Thus, the imposition of a private rights system must be justified, and the justification must be based on some ground other than the tragedy-of-the-commons idea that supports the laws of tangible property. Several rationales have been suggested. The natural rights theory holds that the creator has a moral right to the fruits of his labor, including the benefits produced by his intellect. Although many nations' intellectual property laws are at least partially premised on this rationale, American law has largely rejected it, the theory apparently being that creativity is its own reward. Four other rationales exert more of an influence on intellectual property law; three to a lesser extent and one to a greater extent. The lesser theories include the exchange-for-secrecy rationale, which states that, without a legal right to prevent others from copying his invention, the creator may be tempted to keep it secret. If he does, others may unknowingly duplicate the effort that went into creating it. Moreover, no one will be able to use its ideas to push the frontiers of knowledge further. Even though creating an exclusive right in the innovation raises costs, the increase is offset by the benefits of disclosure. The quality-control principle looks at the exclusive right as a method for protecting the innovation once it is released. By giving the holder of the right the power to control how the innovation is used, exclusive rights enable him to maintain its integrity. He can, for example, use this right to prevent others from distorting or mutilating his work, thereby diluting its quality. The prospecting theory shares some of these quality-promotion elements. It argues that one value in a system of exclusive rights is that it concentrates research. Like a miner who owns her mining claim, the holder of an exclusive right has the incentive to fully develop her ideas. And since anyone else who wants to pursue work in that field must seek her authorization, the holder comes to possess comprehensive knowledge of how the field is unfolding and can help maintain an ‘orderly market’ in its further development. The profit-incentive theory, which has the most dominant influence on the shape of American intellectual property law, takes the most utilitarian approach. It argues that a period of exclusivity is necessary to protect the innovator from copiests. This protection is needed because the costs of copying are lower than the costs of innovating, and so the copiest/freerider could easily capture the entire market for the product and prevent the innovator from earning back the costs of producing the invention. Since most inventors cannot afford to donate their services to the public, the optimum level of innovation will not be achieved without exclusivity. Of course, government could solve the freerider problem by subsidizing innovative efforts, but exclusivity works better because market mechanisms generate a reward that, more or less, mirrors the benefit the public sees in the invention. Presumably, others will be induced by this profit to channel their innovative efforts into areas the public especially values. As the following pages will demonstrate, the question whether exclusivity is justified in a particular case, and if so on what theory, is at the heart of many of the pivotal disputes underlying American intellectual property law. How these questions are resolved—and what power, as a constitutional matter, the states and Congress have to resolve them—determines whether a particular endeavor will receive legal protection at all, and whether it will receive that protection under the patent system, the copyright laws, trademark law, or some other state or federal regime. In the end, the choice of justification shapes both the rights of creative individuals and the quality (and quantity) of the product that passes to the public.

Source Publication

Fundamentals of American Law

Source Editors/Authors

Alan B. Morrison

Publication Date

1996

Intellectual Property Law

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