Costly Screens, Value Asymmetries, and the Creation of Intellectual Property

Abstract:     
Copyrights arise the moment an author fixes a work in a tangible medium of expression, costlessly and immediately. Patents, by contrast, arise only after an applicant successfully navigates a cumbersome examination process. Numerous writers have critiqued the resulting proliferation of copyrights as excessive, in some cases arguing for more formalities in order to restrict the ease of copyright vesting. The patent examination process has drawn criticism as costly and ineffective — in contrast to copyright, too laden with formalities. In this paper, we focus on process costs (or lack thereof) to show that these very different means for acquiring intellectual property rights may be more optimal than is generally believed. The high costs of navigating the examination process deter would-be patentees who expect their property rights to generate only low private value. Moreover, due to an important asymmetry among the social and private value of patents, the costly screen is likely to select against socially harmful patents in disproportionately high numbers. The examination system thus eliminates patents that create low social value while creating no risk of eliminating patents that generate high social value. Copyright is characterized by just the opposite asymmetries. Because there are numerous works that generate high social value but low private value, the impact of costly screens would be to preclude the production of many of the publicly beneficial works that copyright is designed to create. In addition to providing a positivist explanation for why the patent and copyright systems differ, this application of costly screen theory also points in the direction of what we call a unified theory of IP process. This theory illuminates the essential connection between the statutory construction of exclusive rights in information and the particular processes by which those rights vest.

Keywords: intellectual property, patent, copyright

Working Paper Series