Abstract

The literature on the economic analysis of intellectual property rights evidences a broad scholarly consensus on a number of central and important issues. First, intellectual property rights enable economic actors to capture some of the benefits of the investment they make in establishing a good reputation, creating expressive works, and inventing new and improved technology. Absent intellectual property rights, copiers are free to take for themselves a significant part of the economic benefit generated by these types of investment and to undermine the incentive to make these in- vestments in the first place. Second, the investment activities induced by intellectual property rights-developing a positive reputation with consumers, creating expressive works that consumers want to read, view, or hear, and developing improved technology- are efficient investments up to the point that consumers are willing to pay for their fruits. Third, a decentralized system of incentives such as that created by a system of intellectual property rights will over time produce results better preferred by consumers than will any kind of centrally directed subsidy system. Fourth, intellectual property rights systems have costs, costs involved in identifying, defining and enforcing the subject matter of the rights. Fifth, the intellectual property regimes of the United States, in particular, and of the developed economies are, as a general matter, economically sensible, no matter what particular details may concern a particular author. Even Justice Stephen Breyer, that once youthful Harvard skeptic, has said that the issue is not whether to have intellectual property rights, but what form they should take.

Scholars made considerable progress over the last century understanding the economics of intellectual property rights. Yet, much remains to be done. There is ample room for additional progress in the literature. Indeed, it seems likely that this progress will result in part from the work of the scholars who assembled for this conference.

Abstract

Several recent commentators have criticized trends in the patent system by suggesting that the goals of the system can be better achieved through a variety of approaches that avoid or mitigate the monopoly-type impact of property rights. Suggested alternatives include the use of cash rewards, buy-outs, and liability rules, as distinct from property rules. This paper uses the important contributions made by these commentators to reveal shortcomings in any view of the patent system that focuses only on incentives to engage in inventive activity. The paper offers a new view of the patent system that embraces property rights and property rules as core elements of the patent system. According to this view, property treatment is essential for the subsequent commercialization activity that is necessary to get embodiments of nascent inventions into the hands of consumers and for efficiently identifying which inventions are worth the costs of government intervention in the first instance. The recently suggested alternatives fail to address these important goals of the patent system and would actually frustrate them. In addition, the current system already addresses many of the concerns raised by such commentary. The paper reveals how property rights and commercialization motivated the creation of our current patent system and explains many controversial trends in the system, including those that sparked the recent critical commentary, as well as those in other intellectual property regimes such as trademarks.

Summary

This article uses property rights theory and the theory of the firm to analyze the behavior of the participants in nonprofit organizations. It locates the failure of nonprofit oversight in the confluence of strict standing rules and nearly insurmountable agency costs. The article repudiates the conventional solutions to the problem (ranging from relaxing standing limitations to restricting the use of the nonprofit form), and proposes a contractual solution through which nonprofits or their founders would secure the services of a set of independent agents to monitor and, where appropriate, enforce the nonprofit’s charter and the relevant fiduciary rules through judicial action. Because the monitoring agents would function within a market framework, market controls should operate to constrain the behavior of these agents. Thus donors, philanthropists, and beneficiaries would receive the benefit of effectively monitored corporate (or trust) agents who do not present a significant agency cost problem. The result should be increased accountability on the part of nonprofit agents to their donors or patrons without the serious threat of frivolous suits or politically-selective attorney general enforcement.