Trolls and Orphans

Abstract

Patent trolls and orphan works are major topics of discussion in patent and copyright law respectively, yet they are rarely discussed together. Commentators seem to regard these two problems in modern IP law as discrete issues with little to do with each other.

In reality, patent trolls and orphan works are two sides of the same coin. The patent troll problem occurs when users of a technology are surprised by the emergence of a previously undiscovered patent holder, who holds up the user for the value of fixed investments made in the patented technology. The orphan works problem occurs when potential users of a work fear the later emergence of an undiscovered copyright holder, and therefore refrain from using the work. In both cases the problem is one of an undiscovered IP owner emerging to hold up a user who has made irreversible fixed investments.

Understanding the common roots of orphan works and patent trolls has a theoretical payoff in showing how economic theory applies in similar ways across distinct branches of IP law, and explains why proposed solutions for patent trolls and orphan works have often unwittingly converged despite the lack of interaction between the two literatures. More practically, understanding patent trolls and orphan works as manifestations of a holdup problem suggests that the literature would benefit from devoting more attention to solving the holdup problem in IP law, while devoting less attention to other issues that have thus far dominated the troll and orphan debates.

Keywords: copyright, copyright holders, holdup, intellectual property, IP, non-practicing entities, normative theory, orphan works, patent trolls

JEL Classification: K11, K42