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Abstract:
This chapter for the OXFORD HANDBOOK ON LEGAL STUDIES provides an overview of the theoretical literature in Intellectual
Property, and suggests directions for further study. The emphasis is on economic analysis, but effort is made to embrace other perspectives as well.

intellectual property, copyright, patent, trademark, trade secrecy, rights in industrial design, rights of publicity, database rights, rights against misappropriation, "intangible" as a unifying concept, intellectual property doctrines, IP doctrines, "intellectual" as a unifying concept, similitude among patterns in IP, normative basis of IP doctrines, Lockean theories in IP, fair use, cybersquatting, rights of publicity, economics of IP, monopoly analysis, game theory perspective in IP, comparative institutional competence, justice, desert, labor theory of property, gift, gratitude, price discrimination, monopoly, deadweight loss, legal categories, taxonomy, public domain

Abstract:
This article suggests that that from a perspective of market-based economics, the various defenses to property torts (including the tort of copyright infringement) can be divided into two categories. The two types correspond in a rough but useful way to the categories of defense in criminal law known respectively as "excuse" and "justification."

"Excuse" connotes a response that the law allows but does not want emulated. Therefore, from a market perspective, "excuse" can be used to denote behavior that the law allows to bypass the market because of particular circumstances, but which we would prefer to occur through a consensual market transaction. A case of "excuse," then, would arise when economic norms remain the appropriate governing criteria, but the market has temporarily become an unreliable mode of increasing social welfare because of a failure of perfect market conditions (information is imperfect, significant transaction costs are present, and so forth). In such a case, if the transaction cost problem or other market malfunction were eliminated, the court would want the defendant to proceed through the market. At best, therefore, the defendant's market bypass is "excused."

By contrast, the notion of "justification" connotes behavior that, even absent special circumstances, we would be willing to see emulated. Market bypass can be "justified" when significant noneconomic norms or noncommodifiable interests give rise to a court's doubts about the reliability of the market as a mode of achieving social goals. Justification occurs when, even if market conditions were perfect, it would be normatively appropriate for the defendant to proceed outside the market's ordinary process of consent and payment.

The article argues that excuse and justification should be applied separately to three distinct levels of inquiry: (1) the appropriateness of the defendant's behavior in using the plaintiff's property, (2) the appropriateness of the defendant's having failed to obtain the property owner's consent, and (3) the appropriateness of the defendant's having failed to pay compensation.

The article also suggests, inter alia, that cases of "excuse" are curable in a way that cases of "justification" are not. It also suggests that a property owner who can show that the defendant's behavior significantly harms him is likely to be able to defeat claims of "excuse," while claims of "justification" are likely to be more robust against showings of plaintiff harm.

For an example of "excuse" in copyright, consider cases where transaction costs prevent otherwise-desirable negotiations between copyright owners and users, e.g., where individual copiers are making photocopies of articles, or are making videocassette recordings of television programs at home. A court might well order "fair use" as the only practicable way to preserve the socially-valuable copying behavior. If so, however, the defendants? failure of payment and consent is only "excused." When transaction costs decrease in such a case, the court might instead enforce the copyright and expect consensual licensing to evolve between the copyists and the copyright owners. "Excuse," therefore, suggests only a temporary market bypass.

Defenses falling within the other category, "justification," appear where the market's unreliability arises from the market's inherent limitations. Curing a temporary market imperfection would not eliminate the defense.

As an example of "justification" in copyright law, consider utilizing "fair use" as a way to escape private censorship. The ongoing litigation over THE WIND DONE GONE, a novel by Alice Randall, provides a good illustration. Currently being sold as an 'unauthorized parody' of the famous GONE WITH THE WIND ("GWTW"), the GWTW copyright owners are suing to take Randall's novel off the bookstore shelves.

Randall's book would never have been authorized by the GWTW copyright owners. In THE WIND DONE GONE, Randall continues the story of GWTW from an Afro-American perspective, and uses elements which the GWTW copyright owners had forbidden other, potential authors of sequels to use - most notably, miscegenation. Randall's narrator and main character is the newly imagined daughter of a union between Scarlett O'Hara's father and the character known as "Mammy." Randall utilizes copyrightable elements from the target work, GWTW, in order to free herself and others from that work's harmful effects.

In cases like Randall's, we might well feel the target work copyright owner should have no control over the new work even if the market were frictionless and otherwise perfect. If so, then regardless of the presence or absence of perfect market conditions, it is "justifiable" for the parodist or critic to proceed without obtaining consent. The defendant's behavior (here, writing and selling a 'derivative work' based on the work being criticized) is justified as well.

Whether lack of compensation is also "justified" in cases of parody and other potential fair uses needs to be separately considered. The article acknowledges that turning to monetary remedies (a form of judicially-imposed compulsory license) holds the promise of simultaneously furthering the goals of both incentives and free speech. Nevertheless, the article suggests that despite its surface attractions, such 'liability rule' solutions have some under-appreciated dangers.

Abstract:
This pair of papers involves a reprinting of "Of Harms and Benefits: Torts, Restitution, and Intellectual Property," 21 J. LEGAL STUDIES 449 (1992), along with an introduction to that article for students, entitled "Copyright as Tort's Mirror Image". Both involve comparisons between statutory intellectual property law and common law doctrines.

"Copyright as Tort's Mirror" uses personal injury law to introduce students to copyright, making a link between the doctrines through the notion of "externalities". Just as tort law discourages wastefully harmful behavior by making perpetrators bear some of the costs inflicted, copyright law encourages beneficial behavior by enabling authors to capture some of the benefits generated. For persons trained in common law doctrines, therefore, it may be useful to approach copyright law initially as if copyright were tort law upside-down.

While a full economic account of copyright needs to go far beyond the tort analogy (to consider factors such as industry structures, the "public goods" character of authorial work, and so on), the analogy to torts has many applications. Notably, it can help students understand some of the reasons why the law puts limitations on copyright. For example, consider the motto, "It takes two to tort", and its lesson that both plaintiffs and defendant may need incentives. In tort, the defense of comparative negligence serves to encourage potential victims to take care; in copyright, rules such as non-ownership of ideas encourage potential follow-on innovators to build on their predecessors. "Copyright as Tort's Mirror" also emphasizes the imperfection of the torts-copyright analogy. Among other things, I suggest, gratitude is often an easier emotion to achieve than forgiveness: The exchange of non-compensated benefits may therefore breed community in a way that the exchange of non-compensated harms might not.

The piece being reprinted, "Of Harms and Benefits," primarily addresses the following puzzle: Why is copyright law more willing to internalize positive externalities than is the common law of restitution? Part of the answer lies in the difference in structure between the paradigmatic cases in restitution and copyright. The transaction-cost structure and autonomy implications are significantly different in the two contexts. The article also addresses the choice of "carrots" versus "sticks" as sanctions (in restitution, copyright, and personal injury torts), and offers observations on the packaging of rights, and the impact of institutional form (primarily legislature versus judiciary) on substantive rules.

copyright, torts, restitution, intellectual property, incentives, sanctions, harm/benefit distinction, property rights, law & economics, sticks & carrots, market failure, Coasian bargaining, public goods

Abstract:
The article seeks to clarify what is at stake - and what is not - in the litigation challenging the constitutional validity of the Sonny Bono Copyright Term Extension Act (CTEA). First, the article distinguishes between the CTEA's retrospective term extension of copyright term and the retrospective extensions enacted by prior Congresses. The article suggests that the CTEA provisions are constitutionally questionable in ways that earlier retrospective extensions may not have been. To hold the CTEA unconstitutional would not make all other term extensions vulnerable.

Second, the article shows how non-creative physical activities such as digitization and film preservation have public goods characteristics that did not attach to equivalent physical activities (such as typesetting) in the eighteenth century. The article argues that, nevertheless, no expansion of the Copyright Clause is triggered by this new susceptibility to free riding.

The Constitution does not treat all public goods problems similarly. For example, the Constitution singles out only some public goods for federal concern (e.g., national defense), while leaving others to state and local discretion. Implicit in the Supreme Court's existing jurisprudence is a finding that the Copyright Clause of the Constitution treats the free-rider problems faced by non-creative public goods (such as digitization and restoration of old media) differently from the free-rider problems faced by creative public goods (such as works of authorship). The article argues that the Copyright Clause is exclusively or primarily concerned with providing remedies for the latter. The article thus suggests that the CTEA's retrospective extension embodies a constitutionally impermissible tradeoff because it uses federal power to gain - at most - some encouragement for non-creative activity, while discouraging the creative activity with whose encouragement Congress was originally entrusted.

In addition, the article reviews and expands on the usual economic arguments for limiting the duration of intellectual property. In particular, the article uses the Nirvana Fallacy to show the dynamics that can hide behind the usual unitary notion of "deadweight loss," and recasts another phrase from the language of economics - the "increased costs of creation" - in a way that makes clear the aesthetic and psychological costs imposed by a long copyright.

Sonny Bono Copyright Term Extension Act, CTEA, copyright term, extension of copyright term, retrospective extension of copyright, non-creative physical activities, Copyright, free riding, constitutionally impermissible tradeoff, free-rider problems, deadweight loss, increased costs of creation, creative public goods, public goods, Copyright Clause, intellectual property, creative activities, restraining creativity, creative mental activity, duration of intellectual property, limits to duration of intellectual property

Abstract:
As people become enamored with the possible benefits of allowing price discrimination in contracts for intellectual goods, they should realize that traditional intellectual property law works by fostering price discrimination among customers. This simple fact has implications for federal pre-emption, and is a reminder of the complexity of the economic issues involved. Increasing a seller's ability to price discriminate will often involve increasing his monopoly power, with dubious welfare effects.