Why (and How) Fairness Matters at the Ip/Antitrust Interface

57 Pages Posted: 25 Sep 2003

See all articles by Daniel A. Farber

Daniel A. Farber

University of California, Berkeley - School of Law

Brett McDonnell

University of Minnesota Law School

Abstract

This Article questions the widespread scholarly view that maximizing economic efficiency should be the sole goal of the intellectual property and antitrust laws. We propose that the law should also encourage a fair division of the economic surplus, at least by considering it as a tiebreaker when the dictates of economic efficiency are ambiguous or controversial.

We begin by surveying some challenges that have been made to the theoretical underpinnings of exclusive reliance on economic efficiency, but go on to argue that, even on the terms of welfarism, some regard for distributive fairness is appropriate. First, since fairness is a widely shared social value, rules that promote a fair distribution of the economic surplus are likely to mimic what rational people would voluntarily have agreed to ex ante. Therefore, rules that favor fairness take into account the fact that a fair distribution is a social good for which people are willing to bargain. Second, rules based on fairness often lead to the economically efficient result even on welfarist terms. For example, where there are increasing returns to scale, potential producers and customers would agree ex ante to a fair division of surplus. Such an ex ante agreement makes it easier for producers to gain a critical toehold in the market, fosters expansion, and allows consumers to receive more benefits from economies of scale. Therefore, a rule that favors fairness when the economically efficient rule is ambiguous may itself be the efficient rule.

The Article concludes with an exploration of how a tiebreaker rule in favor of fairness would affect the analysis of intellectual property issues. The first conclusion is that there should be a legal presumption in favor of open standards except where efficiency concerns clearly dictate otherwise. The second conclusion is that the law should disfavor price discrimination and similar conduct by rights holders, again with the qualification that efficiency concerns may override this presumption.

Keywords: Fairness, intellectual property, antitrust, open standards, price discrimination

JEL Classification: A13, D63, K21, L40

Suggested Citation

Farber, Daniel A. and McDonnell, Brett H., Why (and How) Fairness Matters at the Ip/Antitrust Interface. Minnesota Law Review, Vol. 87, June 2003. Available at SSRN: https://ssrn.com/abstract=439040 or http://dx.doi.org/10.2139/ssrn.439040

Daniel A. Farber

University of California, Berkeley - School of Law ( email )

Boalt Hall
Room 894
Berkeley, CA 94720-7200
United States
510-642-0340 (Phone)
510-642-3728 (Fax)

Brett H. McDonnell (Contact Author)

University of Minnesota Law School ( email )

229 19th Avenue South
Minneapolis, MN 55455
United States
612-625-1373 (Phone)

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