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Abstract: In this article, Professor Frischmann combines a number of current debates across many disciplinary lines, all of which examine from different perspectives whether certain resources should be managed through a regime of private property or through a regime of open access. Frischmann develops and applies a theory that demonstrates there are strong economic arguments for managing and sustaining openly accessible infrastructure. The approach he takes differs from conventional analyses in that he focuses extensively on demand-side considerations and fully explores how infrastructure resources generate value for consumers and society. As a result, the theory brings into focus the social value of common infrastructure, and strongly suggests that the benefits of open access (costs of restricted access) are significantly greater than reflected in current debates. Frischmann's infrastructure theory ultimately ties together different strands of legal and economic thought pertaining to natural resources such as lakes, traditional infrastructure such as road systems, what antitrust theorists describe as essential facilities, basic scientific research, and the Internet. His theory has significant potential to reframe a number of important debates within intellectual property, cyberlaw, telecommunications, and many other areas. Note: Professor Lawrence Lessig will publish a Reply titled Re-Marking the Progress in Frischmann in the same edition of the Minnesota Law Review.
Infrastructure, commons, property, information, environment, intellectual, Internet, propertization, privatization, deregulation, commercialization, network, externalitiy, public good, demand-side, tragedy of the commons, free riding, network neutrality
Abstract: This article develops a dynamic institutional theory of international law that integrates and builds from insights in the legal, economics (game theory), and international relations disciplines. While a number of scholars have applied game theory and international relations theories to international law, this theory is both novel and useful because it provides a theoretic framework for (1) analyzing international commitments, compliance institutions, and the dynamic process by which international legal regimes evolve; and for (2) examining and comparing the strategic institutional approaches taken to address compliance issues in different regimes. Each of these contributions is significant. With respect to the first contribution, international scholars have not developed a rational choice theory that integrates consideration of commitments, institutions and dynamicism. The theory that comes closest is iterated game theory. This theory extends the iterated game theory model, which is often used by rational choice theorists in the international relations and international law disciplines to study international cooperation, by recognizing first that iterated games actually evolve and second that States create institutions to cope with this evolution and sustain cooperation in the face of dynamic change. States understand when entering into an international agreement not only that they face noncompliance risks as traditionally conceived (defection based on incentives presented in iterated game context, for example), but also that dynamic change may threaten the stability of the game (unforeseen events may cause payoffs to change in magnitude or become more or less certain, for example). Accordingly, ex ante, States design institutions to monitor State behavior and adjust payoffs either by rewarding cooperators or punishing defectors - as predicted by traditional game theory - but also to maintain cooperation in the face of dynamic change - as predicted by a theory of evolving games. States create institutions to reduce uncertainty and transaction costs associated with dynamic change and to adjust commitments in future iterations. Such institutions facilitate internal change and maintain cooperation by relieving parties of the need to return to the bargaining table every time the game structure changes. With respect to the second contribution, international scholars have not developed a theory that supports comparative analysis of the strategic institutional approaches taken to address compliance issues. The dynamic institutional theory highlights compliance strategies that have received very little attention by international scholars despite the prominence of such strategies in practice. The article specifically contends that States pursue three types of compliance strategies: Type I strategies focused on adjusting States' incentives to comply by altering payoff structures (the expected costs and benefits of (non)compliance); Type II strategies focused on facilitating cooperation by reducing transaction costs and uncertainty as the legal regime evolves; and Type III strategies focused on maintaining cooperation and improving regime effectiveness by dynamically adjusting commitments over time. Comparative analysis of compliance institutions illustrates that these strategies may be implemented through different types of institutions and that the optimal choice of strategy and institutions may vary considerably across issue-areas. The final part of the article applies the theoretical framework to the GATT/WTO regime as well as the international regime that regulates ozone depleting substances (the "Ozone regime"). Attention is given to these regimes because they have been effective in achieving treaty objectives, are often considered as models for the development of compliance institutions in related areas of international law, and are increasingly the focal point of interdisciplinary legal issues. Applying the dynamic institutional theory to the GATT/WTO regime reveals that, while international trade law has evolved into a relatively strong version of public international law, the strength of the current WTO regime does not derive from strict enforcement-oriented institutions aimed at deterring intentional noncompliance through the threat of sanctions, a Type I strategy. Despite its adjudicative, rule-based orientation, the WTO dispute settlement institution, which is the cornerstone of the WTO regime, actually appears to be management-oriented and facilitative in the sense that it primarily implements Type II and Type III compliance strategies and implements Type I strategies only on a limited prospective basis. This important finding is contrary to conventional wisdom and should inform debates regarding reform of the WTO as well as the design of future compliance systems. Overall, the WTO compliance system is designed to maintain regime stability by internalizing (within the structure of formal, legalistic institutions) issues that otherwise might prompt parties to work outside the system (in the realm of pure politics). Applying the dynamic institutional theory to the Ozone regime reveals the complex, multifaceted nature of the Ozone compliance system, which implements all three strategies through a host of innovative institutions. As a result of this system, the Ozone regime has experienced very high rates of participation and compliance while dynamically adjusting commitment levels and adding newly identified ozone depleting substances to the list of regulated substances. Notably, although the system includes institutions empowered to implement Type I strategies through both positive and negative means (side-payments and penalties), no significant penalties have been given. To date, the compliance system has operated primarily in "managerial mode" with the threat of enforcement lurking in the background.
international law, international cooperation, compliance, rational choice theory, institutionalism, institutions, international relations, dispute settlement, WTO, DSU, regimes
Abstract: This article analyzes the following general question: Will the full range of end-users be adequately supplied with the Internet in the long-term to satisfy their particular end-uses if the Internet infrastructure remains privatized and commercialized? In other words, if the Internet infrastructure is a necessary input for producing various public and private goods (i.e., in facilitating different end-uses), will procurement and commercial markets adequately supply society with Internet infrastructure? Of course, such a general question cannot be answered in this article, but analyzing the question itself sheds light on fundamental misconceptions regarding our society's exaltation of market-based provision of goods and services in general, and of the Internet in particular. In order to even approach the question, we need to understand what the Internet is, how the Internet is produced, who the end-users are, how the end-users use the Internet, and what we mean by adequate. This article develops a framework for understanding these preliminary questions, and accordingly, is only the beginning of what should be a substantial theoretical and empirical (re)evaluation of the respective roles of government and the market in supplying society with the Internet. As Stiglitz, et al. recently highlighted in their study, The Role of Government in a Digital Age, there is a growing need for re-thinking the role of government by policy-makers, the press, the business community, and academics. In tandem with that analysis, the role of markets must be reevaluated as well. Part I provides a brief, descriptive account of the evolution of the Internet. It focuses on the establishment, management, and eventual privatization, commercialization, and decommissioning of NSFNET, the precursor of today's Internet. Although initially developed to achieve noncommercial research-oriented objectives, under the management of the NSF the network was gradually transitioned to accommodate commercial interests. Importantly, the roles of government, industry and academia shifted in line with shifts in the expected applications of the emerging technologies. Thus, as the technologies evolved, so did the expected applications and objectives behind continued development efforts, and not surprisingly, so did the roles of government and industry. Furthermore, the transitions were prompted by, among other things, the recurring need to upgrade the Internet infrastructure in the face of growing congestion problems. Part II provides an economic model of Internet infrastructure, focusing on both its intrinsic and extrinsic nature. Intrinsically, Internet infrastructure is a sometimes rivalrous, nonexcludable good. Often, it acts as a public good and is nonrivalously consumed by end-users, but during peak usage times, it acts as a common pool resource that is rivalrously consumed. In addition, the Internet infrastructure has been built upon an end-to-end architecture, which essentially means that the infrastructure does not discriminate among data packets it carries. This design principle promotes the interconnection of networks (rather than fencing) and focuses application development and innovation on the demands of end-users. Extrinsically, the Internet infrastructure acts as an input in the production of a wide range of goods - private, public, and everything in between. Both the intrinsic and extrinsic nature of the Internet infrastructure should guide an assessment of how society should rely on the market, the government, or both to provide it with the Internet. Part III then applies the model developed in Part II to assess both the past and the future of the Internet, focusing primarily on the Internet's interconnection infrastructure. In looking at the past, as described in Part I, Part III.A evaluates the justifications for shifting from government ownership and control to private ownership and control: Was privatization and commercialization of the NSFNET justified? Then, by looking at the potential congestion and public goods problems on the Internet in the future, Part III.B considers whether a shift back to some degree of government provision will likely be justified: Will the market effectively supply Internet infrastructure to the public? This Part is a preliminary theoretical assessment of market and government provision of Internet infrastructure that sheds light on what we mean by adequate. As explained below, adequate provision does not equate with efficient operation of the market because social demand for Internet infrastructure will be underrepresented by market demand over the long run. Moreover, if the underlying design (or architecture) of the Internet infrastructure is driven solely by commercial concerns, even in the theoretically ideal market scenario, the Internet commons likely will disappear in future upgrades of the infrastructure. Part IV takes a more focused look an Internet-dependent application where individuals are the end-users creating important public goods - the public domain for information. This example illustrates a particularly important dynamic. The Internet increases and enhances the opportunities for individuals to contribute meaningfully to the production of public goods. However, in order for individuals to produce these public goods, they must purchase an essential input - the Internet, whether access, interconnection, posting capacity, bandwidth, etc. - from commercial firms. On one hand, individuals may have difficulty assessing social demand for the public goods they produce. On the other hand, even if they could assess this downstream social demand, they may lack the incentives to pay market rates upstream for the necessary Internet inputs. While this dynamic is well known with respect to public goods as a general matter, the synergistic role of the Internet and individuals in the production of public goods is a topic deserving of future study. Finally, Part V concludes with some observations. Given the tremendous expectations society has for the Internet, privatization, commercialization and deregulation should be tempered by a more careful consideration of social welfare. There is no doubt that market actors have contributed immensely to the evolution of the Internet in terms of investment, products, services, and infrastructure, and furthermore, that the government's light-handed approach to regulation has given producers and consumers substantial freedom to innovate and to self-regulate with respect to many issues affecting the Internet community in ways that have produced substantial social benefits. This article does not challenge either of these general observations. Nor does it directly advocate increased government regulation. The basic and rather straightforward point is that even if the market were to perform perfectly, in terms of allocating resources and satisfying consumer demand, it would nonetheless undersupply society with Internet interconnection infrastructure over the long-run because market demand for the Internet is but some fraction of social demand.
Abstract: Economists since Demsetz have viewed property rights as a way to internalize the external costs and benefits one party's action confers on another. They have thought this internalization desirable, reasoning that if a party didn't capture the full social value of her actions she wouldn't have optimal incentives to engage in those actions. Measured by this standard, IP rights are inefficiently weak. There is abundant evidence that the social value of innovations far exceeds the private value. But there is also good evidence that, contrary to what economists might assume, these spillovers actually encourage greater innovation. The result is a puzzle for Demsetzians. In this article, we offer three insights that help to explain the positive role of innovation spillovers. First, we note that in IP, unlike real property, a wide range of externalities matter, because IP rights are much less certain than property rights, and because the decision to create a legal entitlement will determine whether or not a transaction must occur. Second, we make the point that while society needs some ex ante incentive to innovate, it doesn't need (and doesn't particularly want) full internalization of the benefits of an invention. Third, we observe that even where internalizing externalities is desirable, property rights do not in fact do so perfectly, and they create problematic distortions in circumstances in which the buyer in a transaction makes productive reuse of the work. The result of combining these insights is that at least where innovation is concerned, we cannot rely on the easy equation of property rights with efficient internalization of externalities.
Abstract: Network neutrality has received a great deal of attention recently, not just from legal academics and telecommunications experts, but from our elected representatives, the relevant agencies and the press. Our representatives have held multiple hearings on network neutrality and are actively considering whether to include a provision aimed at preserving network neutrality in pending telecommunications reform legislation. The Federal Communications Commission and the Federal Trade Commission are also considering the issue. The press has been drawn to the debate by declarations that the fate of the Internet as we know it is at stake. Our article directly replies to a series of articles published by Professor Christopher Yoo on this topic. Yoo's scholarship has been very influential in shaping one side of the debate. Yoo has mounted a sophisticated economic attack on network neutrality, drawing from economic theories pertaining to congestion, club goods, public goods, vertical integration, industrial organization, and other economic subdisciplines. Yet he draws selectively. For example, his discussion of congestion and club goods is partial in that he ignores the set of congestible club goods that are most comparable to the Internet - public infrastructure. Yoo focuses on the negative externalities generated by users (i.e., congestion) but barely considers the positive externalities generated by users (he simply assumes that they are best internalized by network owners). Yoo appeals to vertical integration theory to support his trumpeting of 'network diversity' as the clarion call for the Internet, but he myopically focuses on the teaching of the Chicago School of economics and fails to consider adequately the extensive post-Chicago School literature. And so on. In our article, we explain the critical flaws in Yoo's arguments and present a series of important arguments that he and most other opponents of network neutrality regulation ignore.
network neutrality, Internet, discrimination, congestion, telecommunications
Abstract: Our article examines an age old debate about the nature and limits of property rights and the current manifestation of this debate in antitrust law. Many areas of law struggle to balance private property rights - most importantly, the right of exclusion - with the public's right of access to essential resources. What is the best way to manage resources that provide both public and private benefits? For years, academics and law makers have debated this question with respect to transportation systems, communication networks, scientific research, and a variety of other infrastructural resources. Many press for private control of such resources, arguing that the market most efficiently distributes their respective costs and benefits. Others take the position that these resources should be managed in an openly accessible manner. Advocates for this approach maintain that private control often is overly restrictive and unfairly allocates benefits to a few private parties. In the antitrust area, this tension is mediated by the essential facilities doctrine. Under certain circumstances a monopolist incurs antitrust liability in denying a competitor access to a facility under the exclusive control of the monopolist. While versions of this doctrine go back to the beginning of the antitrust laws, it has been heavily criticized by many commentators and by the Supreme Court itself in dicta. In our article, we advocate for the revitalization of the essential facilities doctrine and answer these criticisms. Our article seeks to 1) connect the essential facilities debate in the antitrust field to the broader question of private rights versus open access in other areas of the law, particularly intellectual property law; 2) propose and apply an economic theory of infrastructure that comprehensively defines what facilities are essential and must be shared on an open and non-discriminatory basis; and 3) demonstrate that courts are capable of applying this test in antitrust and elsewhere.
antitrust, essential facilities, infrastructure, open access, intellectual property, refusals to deal
Abstract: Universities face incredibly difficult, complex decisions concerning the degree to which they participate in the process of commercializing research. The U.S. government has made an explicit policy decision to allow funded entities to obtain patents and thereby has encouraged participation in the commercialization of federally funded research. The Bayh-Dole Act enables universities to participate in the commercialization process, but it does not obligate or constrain them to pursue any particular strategy with respect to federally funded research. Universities remain in the driver's seat and must decide carefully the extent to which they wish to participate in the commercialization process. The conventional view of the role of patents in the university research context is that patent-enabled exclusivity improves the supply-side functioning of markets for university research results as well as those markets further downstream for derivative commercial end-products. Both the reward and commercialization theories of patent law take patent-enabled exclusivity as the relevant means for fixing a supply-side problem - essentially, the undersupply of private investment in the production of patentable subject matter or in the development and commercialization of patentable subject matter that would occur in the absence of patent-enabled exclusivity. While the supply-side view of the role of patents in the university research context is important, a view from the demand-side is needed to fully appreciate the role of patents in the university research context and to fully inform university decisions about the extent to which they wish to participate in the commercialization process. Introducing patents into the university research system, along with a host of other initiatives aimed at tightening the relationship between universities and industry, is also (if not primarily) about increasing connectivity between university science and technology research systems and the demands of industry for both university research outputs (research results and human capital) and upstream infrastructural capital necessary to produce such outputs. In this chapter, I explore how university science and technology research systems perform economically as infrastructural capital and explain how these systems generate social value. I explain how the availability of patents, coupled with decreased government funding, may lead to a slow and subtle shift in the allocation of infrastructure resources. Note: This paper was commissioned by The Karl Eller Center at the University of Arizona and the Kauffman Foundation. It will be published in the Elsevier Science/JAI Press Series, Advances in the Study of Entrepreneurship, Innovation, and Economic Growth Volume 16: University Entrepreneurship and Technology (2005). I anticipate expanding upon the ideas in this paper in subsequent work; so comments are welcome.
University research, patents, infrastructure, university entrepreneurship, technology transfer, intellectual property policy, innovative activity, faculty innovation, commercialization and licensing
Abstract: Copyright law provides an excellent case study with which to study and evaluate Harold Demsetz's theory of property rights. Regardless of how one feels about the relationship between property and intellectual property, it is hard to escape the fact that intellectual property rights have expanded and grown more property-like and more privatized in recent decades. There has been an undeniable Demsetzian trend in copyright law. In this article, I critique the Demsetzian trend in copyright law and challenge some of the fundamental premises upon which the normative arguments for continued privatization and propertization of intellectual resources rest. First, I focus on the perceived benefits of internalizing externalities. I argue that externalities do not necessarily distort incentives or, more generally, the market allocation of resources. For many externalities, there is no efficiency benefit to internalization (whether internalization is accomplished by Pigouvian taxes/subsidies or property rights). In the end, the benefits of internalization must be carefully assessed rather than assumed. The view that increasing the degree of internalization through private property rights inevitably leads to increased incentives to invest in creation or distribution is not well-established in either theory or practice. Second, I focus on the frequently invoked solution of efficient licensing and the "logic" that property rights should be extended "into every corner in which people derive enjoyment and value . . . [so that] signals of consumer preference [may] trigger and direct [producers'] investments" (Goldstein, 1994). I argue that there is a fundamental flaw in this logic that undermines the efficient licensing hypothesis. Social demand for individuals' access to and use of copyright protected works often exceeds private demand. Purchasers'/licensees' willingness to pay reflects only their private demand and does not take into account value that others might realize as a result of their use. As I explain, many uses of copyrighted works generate value for third-parties. Finally, drawing from the first two points, I argue that, from a Coasean perspective, both externalities and property rights have symmetrical and reciprocal potentials to distort the market allocation of resources. A priori and devoid of context, one cannot say that the potential distortions caused by a property right, externality, or incremental change in a property right have a net positive or negative effect on social welfare.
Copyright, intellectual property, Demsetz, property, commons, semicommons, spillover, externality, public good, expression, privatization, propertization
Abstract: This essay was written for Loyola University Chicago Law Faculty Issue on Justice, published in the Loyola University Chicago Law Journal. The essay discusses the concept of intergenerational equity. It addresses society's relationship to past and future generations and how this relationship ought to influence our decision making in the present. It opens with a scene from South Park, a television show on Comedy Central, and ends with a discussion of President Lincoln's Lyceum Address.
Intergenerational, shortsighted, justice, Lyceum
Abstract: Cyberlaw scholars have suggested that the outcome of many cyberlaw disputes depends significantly, if not entirely, on a judge's perspective of the Internet and how it works. Much of the debate among scholars focuses on figuring out which is the right perspective and which is the wrong perspective. There are two dominant perspectives of the Internet: an external perspective and an internal perspective. From the external perspective, one perceives the Internet in terms of its technical real-space operations - the Internet is a global meta-network that serves as an open platform for the transmission of information among end-users that connect computers to the network. From the internal perspective, one perceives the Internet in terms of the applications it enables and the ways in which those applications affect end-users; the technical operation of the network infrastructure may be largely irrelevant in terms of one's experience. This internal perspective leads to the conception of cyberspace as virtual reality. In "The Problem of Perspective in Internet Law", Orin Kerr demonstrates the pervasiveness of these perspectives and observes "[b]oth internal and external perspectives can appear perfectly viable depending on the circumstances, and courts and commentators switch between them frequently without even recognizing the change." Kerr argues "we need to be aware of the problem of perspective and develop tools that can help us choose between real and virtual understandings of the Internet when we apply law to it." While I agree with Kerr that "we need to be aware of the problem of perspective," I do not believe that a choice should be made (by courts, legislators, academics, or anyone else) between an external perspective focused on the technical operations of the Internet and an internal perspective focused on end-users' experiences. The perceived need to choose among perspectives is itself problematic. In this article, I contend that both perspectives are descriptively valid and real, and both perspectives yield important insights about the facts of the Internet and the interests at stake in a legal decision. Choosing either perspective may lead to a partial view of the underlying facts in a given dispute (essentially, tunnel vision), which may effectively determine the outcome of a legal decision and bypass the difficult legal (normative) analysis that courts, legislators, and academics should undertake. Choosing a perspective subtly substitutes fact-finding for legal analysis and thereby masks policy decisions in the rhetoric of metaphor and factual analogy. Recognizing that both perspectives provide valid and accurate renditions of the underlying facts will allow courts (and scholars) to better examine the sets of interests at stake in a given dispute and engage in a principled application of relevant legal doctrines designed to address such interests. Cyberlaw disputes tend to involve the following types of interests: (1) physical, tangible assets like computer network facilities, routers, and servers; (2) intangible information assets ranging from copyright-protected expression to public domain data; and (3) relational assets like goodwill, trust, and community values - in other words, assets based on relationships among people. Legal doctrines tend to focus on a particular set of interests. (For example, property law focuses on physical, tangible assets.) Courts applying traditional legal doctrine or developing new doctrine in cyberlaw cases should appreciate the connections (or links) between the three types of interests made possible via the Internet. Courts should be open to the prospect of reconsidering (and perhaps recalibrating) the balancing of interests struck by existing law, and also should consider the complex intersections among different areas of the law. It is well understood that law develops to protect and balance particular sets of interests in a given factual context, and that evolving technology can change the factual context and thereby disrupt previously-struck balances, e.g., consider copyright law in the digital age. However, it may be less understood that a change in factual context may bring into relief complex intersections between traditionally independent areas of the law. When evaluating and applying law and creating new law, courts must understand and fully appreciate the significance of changes in factual context. Recognizing the validity and utility of both the external and internal perspectives may engender such an appreciation; whereas choosing one perspective over the other may simply lead to tunnel vision.
internet, cyberlaw, cyberspace, metaphor
Abstract: Copyright misuse is a common law defense to copyright infringement. In contrast with defenses addressing the nature of copyrighted material or the defendant's conduct, copyright misuse focuses on the plaintiff's conduct and determines whether the plaintiff is entitled to enforce her rights. This alternative focus orients misuse differently. Copyright misuse regulates copyright owners' use of their rights, polices the boundaries set by Congress in the copyright statute, and protects important public interests. This chapter explores the defense of copyright misuse in a manner calculated to expose the theoretical underpinnings of the doctrine as well as to provide practical guidance on future doctrinal development. The chapter is organized as follows. Part II provides a brief introduction to the (potential) jurisprudential functions of the copyright misuse doctrine. It first develops a schematic model for understanding the jurisprudential relationship between the copyright misuse doctrine and copyright, patent, and antitrust laws. Next, it considers two approaches to formulating and applying misuse principles: per se rules and the rule of reason. Part III analyzes the case law in the Supreme Court and the federal courts of appeals. Part III.A examines four foundational Supreme Court cases. Part III.B covers circuit precedents, and Part III.C covers other influential case law. Part III.D provides a brief overview of district court litigation. In Part IV, we distill a set of guiding principles for evaluating copyright misuse. We conclude that courts ask first whether a challenged action amounts to per se misuse by looking to the facts for evidence of blatantly egregious conduct. Two sets of per se rules may be fashioned by the courts. The first type identifies misuse violating the antitrust laws while the second type identifies misuse violating an important public policy behind the intellectual property grant. We discuss both types of per se rules. If a challenged action does not fit within either set of per se rules, courts may engage in a rule of reason analysis. Again, two approaches are possible. The first approach, which coincides with patent and antitrust analysis, weighs the anticompetitive and procompetitive effects of the challenged action. The second approach is broader in scope and balances policy interests reflected in the intellectual property system. We evaluate these approaches to identifying misuse and conclude that courts should apply both types of per se rules - antitrust-based and policy-based - and should only apply a competition-based balancing approach. We remain skeptical about the advisability of a policy balancing test - e.g., a test that weighs pro-expressive against anti-expressive effects on a case-by-case basis - for doctrinal as well as pragmatic reasons.
copyright, misuse, unclean hands, antitrust, intellectual property
Abstract: The U.S. promotes and produces innovation through a wide range of interdependent institutions, ranging from the grant of an intellectual property right to the direct funding of research. The justification for using multiple instruments is intuitively rather simple: no single institution would efficiently supply all classes of innovations. Why this intuitively simple explanation holds true in theory and practice is a much more difficult question. The answer depends in part on what type of "good" innovation is and in part on how amenable certain types of innovation are to certain forms of institutional provision. To put it more concretely, (1) innovation is a public good that acts as an input for producing a wide range of dependent goods, private to public, including more innovation; (2) various forms of innovation market failure arise, often depending on the type of dependent good that the innovation is expected to produce; and (3) certain institutions are better suited for correcting certain forms of innovation market failure. A comprehensive understanding of each of these aspects of innovation allows one to address the theoretical yet practical policy questions of what the appropriate "mix" of institutions is (or might look like) and whether the current system is doing well at providing the efficient amount of innovation. This paper integrates the dynamic nature of the innovative process with classic economic theory of public goods and investment decision making. The focus is generally on the ex ante considerations that precede public or private investment in research. Innovations are classified in terms of their expected uses. The underlying purpose of this paper is to formulate a framework for evaluating science and technology policy and for determining what form of government institution is best targeted for particular classes of innovation. Parts I (A Model of Innovation), II (The Market for Innovation), and III (Institutional Innovation) develop an analytical framework for innovation policy. There are three foundational themes explored: (1) the nature of innovation itself, (2) the innovation market, and (3) institutions. Innovation and the innovation market must be clearly understood for an assessment of institutions to proceed, and the institutions themselves must be well understood for any comparison to be meaningful. To ground the theoretical analysis in an existing legal regime, Part IV analyzes the Mixed Incentive System for Publicly Funded Researchers created by the Bayh-Dole Act, in which intellectual property rights and government support are jointly used to promote, produce, and commercialize federally funded research results.
Innovation, information, science, technology, intellectual property, patent, institution, Bayh-Dole
Abstract: In The Wealth of Networks: How Social Production Transforms Markets and Freedom, Professor Yochai Benkler provides a thorough and intellectually rich account of our modern information environment and its interrelationship with law, technology, and critically, networks. The book is remarkable in its breadth and depth. Benkler's primary thesis in the book is that the wealth of networks lies in the potential for widespread participation in the making, sharing, and experiencing of the information environment. The emerging networked nature of the information economy unlocks human potential and enables participation in an unprecedented manner. To support his claim that such change is in fact underway, Benkler offers a rich descriptive account of the networked information environment. To support his normative claim that such change ought to be allowed if not encouraged, Benkler appeals to a range of liberal political theories. In the end, Benkler frames a battle over the institutional ecology of the information environment and explains how incumbents may resist change at various layers of the system. To explore how Benkler accomplishes so much, this Review situates his book within cultural environmentalism, a complementary framework for integrating the seemingly disparate areas of policy brought together in The Wealth of Networks. Cultural environmentalism as a theory of information policy originated with Jamie Boyle's 1996 book, Shamans, Software, and Spleens, and his attendant scholarship. Boyle issued a call to arms to protect our cultural environment and used cultural environmentalism as a metaphor to spur the organization of a political, social, and intellectual movement. Cultural environmentalism is potentially valuable as an analytical construct because it focuses attention on our relationships with complex systems that are significantly more nuanced and varied than suggested by more traditional theories of information policy derived from economics or romantic notions of authorship and inventorship. With respect to the natural environment, environmentalism led to a better understanding of natural resource systems and our relationship to those systems, and consequently to an understanding that regulation is needed to preserve and protect those systems for sustainable use. Cultural environmentalism has yet to generate similar understandings, both descriptively regarding the systems and our relationships to them, and normatively regarding the consequences of how we choose to regulate the information environment. Benkler takes significant strides in remedying these deficiencies. Situating his book within the framework of cultural environmentalism reveals its contributions to our understanding of those systems that comprise the cultural environment, how we relate to those systems, and the normative consequences of different regulatory choices we might choose. This framing helps to make The Wealth of Networks more accessible, and at the same time, provides a useful lens for commenting on and extending Benkler's analysis.
intellectual property, information environment, cultural environment, social production, peer production, network, Internet, culture, information, network neutrality
Abstract: In Metro-Goldwyn-Mayer Studios v. Grokster, the Supreme Court will decide the future of Betamax - not the technology, which is already dead, but the Betamax decision issued by the Supreme Court in 1984. As frequently occurs in copyright law, it is a new, disruptive technology - this time, peer-to-peer (p2p) technology - that tests the boundaries and soundness of existing copyright doctrine. This essay makes two basic points. First, the Sony rule, which precludes secondary liability in situations where a technology is capable of substantial noninfringing uses, properly limits the scope of copyrights and prevents them from impeding access to and development of infrastructural technologies, such as p2p systems. Second, commercial significance is an inappropriate metric for gauging the substantiality of noninfringing uses; commercially insignificant but socially valuable noninfringing uses should be recognized as substantial. For the most part, the parties and amici have presented the Supreme Court with the arguments it ought to evaluate. I do not aim to recount or rehash those arguments in this essay. Instead, I aim to articulate an economic argument for retaining the Sony rule that has not been made fully.
copyright, grokster, napster, peer-to-peer, p2p, noninfringing use, Sony, infrastructure, contributory liability, vicarious liability
Abstract: This Essay considers the problem of understanding intellectual sharing/pooling arrangements and the construction of cultural commons arrangements. We argue that an adaptation of the approach pioneered by Elinor Ostrom and collaborators to commons arrangements in the natural environment may provide a template for the examination of constructed commons in the cultural environment. The approach promises to lead to a better understanding of how participants in commons and pooling arrangements structure their interactions in relation to the environment(s) within which they are embedded and with which they share interdependent relationships. Such an improved understanding is critical for obtaining a more complete perspective on intellectual property doctrine and its interactions with other legal and social mechanisms of governing creativity and innovation. We propose an initial framework for evaluating and comparing the contours of different pooling arrangements with an eye toward developing an understanding of the institutional and structural differences across arrangements and industries as well as the underlying contextual reasons for such differences. The proposed approach would draw upon case studies from a wide range of disciplines. Among other things, we argue that a theoretical approach to cultural constructed commons should consider rules pertaining to membership criteria, contribution and use of pooled resources, internal licensing conditions, management of external relationships, and institutional forms along with the degree of collaboration among members, sharing of human capital, degrees of integration among participants, and whether there is a specified purpose to the arrangement.
commons, common pools, governance, public goods, information, knowledge, intellectual property, patent pools
Abstract: Many know the marketplace of ideas as a metaphor. Yet, economics may help explain speech and the First Amendment in more than a metaphoric way. This essay, written for the Law in a Networked World conference hosted by the University of Chicago Legal Forum, explores how the First amendment may operate to sustain a spillover rich networked environment. The essay focuses on (i) the economics of speech externalities and (ii) the functional role of the First Amendment in constraining the government's ability to force or enable actors to internalize externalities associated with their speech. When viewed from an economic perspective, the First Amendment functions as a broad (though not absolute) restriction on the government's choice of actions or interventions with respect to the speech market/environment. The essay suggests that the First Amendment promotes spillovers (positive externalities) and functions more broadly as an institution that sustains a spillover-rich cultural-intellectual environment.
speech, communication, spillover, externality, First Amendment
Abstract: This article designs an enforcement regime that maintains the integrity of the international emissions trading system in the face of significant political and economic incentives for States to shirk responsibilities. State noncompliance with international obligations to enforce domestic emissions limitations presents a significant risk for an international emissions trading system because the systematic utility and economic value of an emissions permit is ultimately dependent upon domestic enforcement. Emissions rights are products of regulation. In essence, they define the legal relationship between a domestically regulated entity and the host State. International trading of emission rights allows private transactions between foreign nationals to realign the legal relationship between the parties and their host States. The legal and economic value of such transactions is derived from the perceived risk of enforcement and the predicted value of relieving such risk. This article focuses on the monitoring and enforcement of obligations undertaken by States that participate in an international emissions trading system. It abstracts from the Framework Convention on Climate Change and the Kyoto Protocol and envisions the following series of events leading to international emissions trading system: 1) A number of States sign an international agreement that commits each State to making reductions in its aggregate, national greenhouse gas emissions according to a detailed schedule. 2) Each State implements its international obligations through national programs, which may comprise various combinations of regulatory programs, from command-and-control to carbon taxes to emissions trading systems. 3) A subset of the States that signed the first "national commitment" agreement also sign a "founding agreement" that establishes an international emissions trading system by harmonizing the domestic emissions trading systems created under step 2. Thus, two legal regimes arise from the agreements, an overarching climate change regime and a subsidiary international emissions trading regime. Of course, an international emissions trading system could evolve in many other ways. This article does not attempt to explain the global warming problem, the existing climate change regime, or the various regulatory options for domestic implementation; these issues are discussed extensively elsewhere in the literature. Instead, the article focuses exclusively on the coordination problems that must be dealt with in negotiating the founding agreement for an international emissions trading system (step 3). Three interdependent components establish the contours an international emissions trading monitoring and enforcement regime, namely, (1) the monitoring institution, (2) the liability rule applicable to permits, and (3) the reprisal mechanism. States must work out the details of these components ex ante and incorporate them into the founding agreement for the international emissions trading system. Finally, the article proposes a novel form of strict enforcement involving buyer-liability coupled with a citizen-State arbitration mechanism (similar to the investor-State mechanism in NAFTA chapter 11). The proposed mechanism provides an end-around the political, decentralized nature of international law.
Abstract: This paper examines commons as socially constructed environments built via and alongside intellectual property rights systems. I sketch a theoretical framework for examining cultural commons across a broad variety of institutional and disciplinary contexts, and I apply that framework to the university and associated practices and institutions.
commons, common pools, governance, public goods, information, knowledge, intellectual property, patent pools, university
Abstract: Wendy Gordon has noted that most of IP law is concerned with internalizing positive externalities. In two recent articles - Spillovers (with Mark Lemley) and Evaluating the Demsetzian Trend in Copyright Law, I challenge the conventional economic theory of intellectual property and specifically the idea that society ought to use intellectual property systems to internalize externalities when feasible. The nature of the challenge - or the spillovers theory - can be viewed in two ways. I would frame the challenge as an internal one based on and consistent with welfare economics. In his reply to the latter article, economist Harold Demsetz seems to accept this view while critiquing aspects of the analysis. Others, such as economist Anne Barron, have critiqued the articles, suggesting that the spillovers theory is not consistent with welfare economics, necessarily relies on some other non-economic social theory yet to be specified, and thus is truly an external challenge to the conventional economic theories of IP. What is interesting about these responses is how they frame a boundary dispute between economic and other social theories of intellectual property. That such a boundary exists is well understood. What seems worth exploring, for purposes of this essay, is how we arrive at and frame the contours of the boundary through a discussion of spillovers. Claims about what is on one side or the other of the boundary may turn on assumptions and beliefs that might not hold up on close inspection. In this short essay, I reengage this debate and the critiques I've mentioned, and explore the boundary between economic and other social theories of intellectual property. I begin with a brief discussion of the conventional economic theories of intellectual property. I then discuss the spillovers theory and various critiques.
intellectual property, spillovers, externalities
Abstract: This essay explores how my recent work on infrastructure and commons applies to environmental resources. Part I briefly describes the core idea, which is developed extensively elsewhere. Part II suggests how it might apply to the natural environment. Specifically, Part II (a) frames the difficult environmental valuation and management problems; (b) applies the infrastructure criteria and delineates environmental infrastructure; (c) offers a few insights regarding environmental management and regulation; and (d) considers how infrastructure theory relates to the literatures on ecosystem services and multiple use management.
infrastructure, commons, environment, ecosystem, nature, semi-commons, public goods, environmental law
Abstract: Due to the costs of negotiating treaties, signatories may defer the resolution of uncertainty to the future rather than include all possible states of nature in a treaty. This particularly will be the case when addressing uncertainty mandates a more comprehensive treaty, and the cost of negotiating this comprehensiveness increases at an increasing rate. In such a context, the existence and form of compliance institutions is of particular importance. We develop a formal game theoretic model to consider the relationship between treaty negotiation, compliance institutions, and uncertainty over future states of nature. In our model, states of nature determine the costs of compliance with a treaty. We explain that when resolving uncertainty is deferred to the future and compliance costs are unobservable, an escape clause can sustain viability of a treaty. When escape is considered de jure compliance, and signatories are incompletely informed about one another's costs of compliance, an incentive for spurious escape arises. In such a context, we demonstrate that a dispute resolution mechanism that discloses compliance costs of a signatory invoking escape can deter spurious use of the clause. We incorporate uncertainty through the specification of a discrete time, continuous state stochastic compliance function. Because many policies for which treaties are negotiated exhibit persistence in their costs of compliance, we contrast compliance costs processes with and without persistence. We disclose that persistence undermines the effectiveness of an escape clause (with a dispute resolution mechanism) in promoting compliance. The second effect of persistence is that it affects the decision of the treaty negotiators regarding the deferral of uncertainty to the future. With persistence, more states of nature (compliance costs) must be addressed by the treaty either in the form of more detailed commitments, or in the form of compliance institutions designed to respond dynamically to evolving conditions. Thus the costs of negotiating a treaty are likely to be higher when persistence is present then when it is not.
treaty, compliance, international law, institutions, uncertainty, evolving games, game theory
Abstract: This essay makes two related contributions. First, it introduces the concept of “patent pull” to highlight an underexplored demand-side perspective on patents. Patents “pull” (private and public) investment to productive activities that would be less attractive in the absence of patents. Exploring the role of patents from the demand side reveals that beyond affecting traditional capital investment decisions, patents can have more subtle and perhaps pervasive impacts on organizations and institutions, including but not limited to universities. This essay focuses on university science and technology research systems. Second, this essay examines how university science and technology research systems perform economically as infrastructural capital. Specifically, it explains that a university science and technology research system is an integrated system of productive resources aggregated within a university setting and used to produce streams of research-related outputs, as well as other important outputs, e.g., educated citizens. The system is comprised of at least five different sets of related, complementary resources, including 1.) Human capital, including complementary networks of people such as professors, researchers, students, administrators, technicians, and other support staff; 2.) Governance capital, such as rules, norms, policies and other collective constraints that guide system participants’ behavior; 3.) Physical capital, such as land, facilities, and equipment, 4.) Intellectual capital, such as knowledge, information, and ideas; and 5.) Financial capital. Each of these capital resources is an essential component of the system. Although the bundle of such resources and manner in which they are bundled varies considerably across universities, all universities use these resources collectively and continuously to produce socially valuable human and intellectual capital. The essay raises some questions about the impacts of university patenting and commercialization on university science and technology research systems. It considers how the demand pull exerted in downstream commercial markets may affect the allocation of infrastructural capital. The examination is preliminary and intended to support further exploration and empirical study. While there have been plenty of empirical studies of university patenting behavior and the performance of technology transfer offices, there has been less attention paid to the allocation of infrastructural capital. The essay suggests a few avenues for further research.
patent, demand, university research, technology transfer, infrastructure, infrastructural capital, intellectual property, commercialization
Abstract: This is a review of Jonathan Zittrain's recent book, The Future of the Internet and How to Stop It (Yale Univ. Press 2008). The review was published in Science on July 25, 2008. This draft version lacks the formatting and a few edits found in the final published version, but the substance is the same.
Internet, generativity, Zittrain
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