The Political Economy of Intellectual Property Law
by William M. Landes (Univ. of Chicago Law School) and Richard A. Posner (Judge, U.S. 7th Circuit Court of Appeals and Univ. of Chicago Law School)
Summary
Why has the U.S. rapidly expanded intellectual property law over the last fifty years or so? This paper is a longer version of Judge Posner’s November 19, 2002, AEI-Brookings Joint Center Distinguished Lecture, which was based on Chapter 14 of the authors’ book, The Economic Structure of Intellectual Property Law (2003).
The IP Explosion
Part I of the paper presents empirical evidence for the expansion of intellectual property law. Based on the number of words in the respective statutes, between 1946 and 2000 the copyright statute increased by a factor of nearly eleven, the patent statute by a factor of more than four, and the trademark statute by a factor of about 2.3. Given the expectation that the Federal Circuit Court of Appeals would interpret the patent statute favorably to inventors, its creation in 1982 may be a case of judicial expansion taking the place of statutory expansion, which perhaps accounts for the fact that the patent statute grew less than the copyright statute. The authors also note that copyright law specifies the nature of works that can be protected because copyrights are simply registered and asserted, while the patent and trademark statutes are more general, and applications for patents and trademarks are vetted by government agencies before they are approved.
Public Choice Theory
The paper proposes that “public choice” theory may explain much of this expansion. Part II briefly outlines this theory, an effort by economists to explain political and governmental processes, including legislation, as a result of the workings of the law of supply and demand. Public choice theory focuses on how interest groups influence legislation and policy. Interest groups have a problem motivating their members to take collective action voluntarily. Collective action is more likely to succeed if the benefits are great and the costs are small, or if the costs are large but are widely diffused or are imposed on politically impotent groups. These conditions are most likely to be met if the legislation or regulation is sought by (but not opposed by) a compact interest group that has much to gain from it. Public choice theory has made significant contributions to understanding public utility and common carrier regulation, and certain other forms of regulation, including occupational licensure, safety and health regulation, and tariffs, where the theory showed that the principal effect of regulation was to bring about or shore up producers’ cartels.
Part III applies public choice theory to intellectual property. One possible public choice explanation for the expansion of intellectual property regimes is the inherent asymmetry between the value of intellectual property to its owners and the value to would-be copiers of the freedom to copy. The enforcement of exclusive rights like intellectual property can shower monopoly rents on their owners, while copiers can hope only to obtain a competitive return, because they may be competing with many other copiers. This asymmetry should make it easier to organize an owners’ interest group to seek expansion of intellectual property rights than to organize a copiers’ interest group to oppose expansion. The asymmetry has been especially pronounced in copyright law extensions. In every such case the extended term applied to existing works as well as those created after the extension. Since the costs of creating existing works have already been borne, the additional revenue generated by the extension is almost entirely profit to the copyright owners—in other words, economic rent. In contrast, those opposing the extension do so on behalf of intellectual property that has yet to be created and that can be expected to yield only a competitive return.
Interest Groups and IP
A count of filings of amicus briefs in Supreme Court intellectual property cases to obtain an insight into the role of interest groups revealed 292 such briefs in the thirty-three intellectual property cases that the Court has heard. In the eleven patent cases there were eighty-two briefs in support of affirming or expanding patent protection and only forty-eight opposed. In the remaining twenty-two cases there were eighty-two briefs in support of the intellectual property right and eighty opposed.
The authors note the coincidence between the deregulation movement and the expansion of intellectual property and note that, given the close relation between markets and property rights, it would be natural for free-market ideologues to favor an expansion of intellectual property rights. But they also note that intellectual property was already “deregulated” in favor of a property rights system, and the danger that the system would be extended beyond the optimal point was as great as the danger that it would be undone by a continuing decline in the cost of copying. The authors point out that equating intellectual property rights with physical property rights overlooks the fact that the government is far more involved in the former, issuing patents and registering copyrights and trademarks. They quote Friedrich Hayek’s warning that “a slavish application [to intellectual property] of the concept of property as it has been developed for material things has done a great deal to foster the growth of monopoly. . . .”
With regard to patents, the authors cite, at least as a partial
explanation for the expansion, the fact that specialized courts
are more likely to have a “mission orientation” than
generalist ones. This has been the experience with the Federal
Circuit, which has defined its mission as promoting technological
progress by enlarging patent rights. This, in turn, suggests to
the authors a possible public-choice explanation for the creation
of that court. The court was responsible for an increase in the
number of patents applied for and granted, but this increase was
not found by the authors to have had a positive effect on the rate
of technological progress. Rather, the most certain result of the
court’s creation has been an increase in the demand for the
services of patent lawyers, a demand that is positively related to
the number of patents granted. This demand in turn increases the
number of patent applications, all of which also require lawyer
input. Unsurprisingly, patent lawyers pressed strongly for the
court.
