Economic Analysis of the Public Domain
University of Haifa - Faculty of Law
THE FUTURE OF THE PUBLIC DOMAIN, Ch. III, pp. 27-59, Kluwer Law International, 2006
The field of Intellectual Property has seen in the last decade the most significant changes since its birth following the invention of printing. On the one side, the technological revolution of the Internet and accompanied technologies brought about a process of commodification and propertization - a vast increase in informational goods and services that are protected by property rules (either by law or by other means such as technology, which itself is protected by law against circumvention). On the other side, variety of calls amounting to a social movement advocates a counter process that will halt and indeed reduce propriety regime. The Public Domain is a key feature of this movement, although, in the course of this debate the exact meaning of the Public Domain has also changed. Once it was referred to as including creations for which IP protection had expired. Then, it encompassed also creations on which statutory exceptions to IP, such as free use, are made active, and now it may refer to any resource for which legal rights to access and use for free are held broadly.
The paper adopts the broad definition of the Public Domain, which is similar to Commons and questions the dichotomous division between IP and the Public Domain, proposing a more complex view of property rights, in general, and of intellectual property, in particular. Common view places Law and Economics on the pro-properization side of the debate. The paper argues that this is inaccurate and that the law and economic analysis is more complex than what is usually presented. More specifically it argues that on a positive level of analysis the ongoing commodification of information can be perceived as an inevitable phenomenon, based on the traditional analysis of Harold Demsetz, and that the accusations of the pro Public Domain camp against the course of legislative and judicial expansion of IP is itself an insight of law and economics. On the normative level of analysis the paper shows a more complex law and economics attitude in the context of this debate: first, economists generally favor free markets over government regulation, but in the context of intellectual property it is not clear whether creating or broadening intellectual property rights by law are on the side of free market or of government intervention. Second, within the prime normative goal of law and economics - maximizing the welfare of society - IP plays contradicting functions. Without intellectual property, incentives to create will be lacking and scientific progress would cease or significantly slow down, decreasing the welfare of society. However, most new inventions are based on older ones and thus full propertization of every idea and expression would slow down scientific and cultural progress. The paper, therefore, argues that in order to enhance society's welfare we do need a significant Public Domain.
The paper pays special attention to the economics of the digital realm, which ought to change the parameters underlying the traditional economic rationale of intellectual property and thus of the Public Domain. One of the most important features in this context relates to the state of technology and its pace of change, traditionally taken as an exogenous variable within the law and economic analysis. The paper argues that the state of technology ought to be endogenized, transforming the equilibrium of traditional analysis and also affecting the analysis of traditional market failures such as high transaction cost, which may no longer play a crucial role in the choice of legal rules.
Number of Pages in PDF File: 32
Keywords: Intellectual Property, technological, property, Public Domain, digital realm
JEL Classification: K10, K11, K20, K22, K29, K30, K33, K39, K40, K42Accepted Paper Series
Date posted: October 3, 2006
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