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Intellectual Property
University of Pennsylvania School of Law
Yoo, Christopher S.

Intellectual Property – Generally
Philosophical Justifications for Intellectual Property Protection
John Locke’s Natural Rights Perspective – “sweat of the brow” theory
·         Man’s labor + nature’s resources = property.
·         The only thing that you own is your body, so you own the things you mix with your body through labor.
·         Waste Conditions:
1.       Only can take as much as you can use and no more.
2.       There must be enough left for everyone else.
o   Note: In an exchange economy (i.e. division of labor), this condition is easily satisfied since each person collects more than their fair share in order to trade away for other things.
·         Question – How do you value property? Based on the labor put in? Or on the quality of the product?
o   Labor theory of value: If you work for something then you deserve compensation.
o   However, if labor is the basis of property then property should be valued based on the amount of labor put in. But sometimes people who did very little work get lots of IP rights so natural rights can’t be the only theory operating in IP (Trade secret/copyright are good fits for Lockean theory).
Radin (+Hegel) and Personhood Perspective
·         Man’s relationship with property defines his sense of self.
·         Also, property tells me what the difference is between me and you.
·         You aren’t a person/individual unless you have property.
·         2 types of goods:
1.       Fungible goods – an object that is perfectly replaceable with other goods of equal market value.
2.       Personal property – an object that is so closely related to one’s personhood that its loss causes pain (i.e. you feel ‘violated’) that cannot be relieved by the object’s replacement with a copy.
·         Question – Should we have continuing control over an object simply because we put our personality into it? (E.g. the mobile that was sold to the city of Pittsburgh). Connection to moral rights?
Utilitarian/Economic Incentive Perspective – *Dominant theory about why we protect IP*
·         Goal is to make the pie as large as possible with limited resources by combining the various uses of resources in the most efficient way.
o   How do we do this? 
1.       Productive efficiency – Make as much as possible with limited resources (i.e. increase production whenever the benefits (MB) exceed the costs (MC)) – (like dynamic).
2.       Allocative efficiency – Allocate the pie to the people who value it the most (like Static).
·         Maximum utility occurs when we produce until the point where the benefits = the costs of production
o   However, with intellectual property, MC = 0, so if you were to allocate efficiently, there would be no incentive to create because the price charged would have to be 0.
o   Access/Incentives Dichotomy: The efficient access point is 0, but at 0 there is no incentive to create. So, IP gives you the right to sell something for above the cost that it takes to reproduce (theoretically inefficient). Also, IP allows the first seller to prevent others from reselling at a lower price (without this the author would only make money on the first sale, since a cheaper copy would always be available).
·         Information is a public good, something that free markets do not do very well with. 
o   Because intellectual property rights impose social costs (i.e. MB > MC, so some for whom the benefits exceed the costs are excluded) on the public, the intellectual property laws can be justified by the public goods argument only to the extent that they do on balance encourage enough creation and dissemination of new works to offset those costs.
Classic economic problem
IP is a public good.
Nonexcludability – I can’t restrict the benefits to only the people who pay for it (e.g. lighthouse). Leads to free riding (meaning some lighthouses will not be built)
Exclusivity (if perfect) solves free riding
Nonrivalry/nondepletability – the fact that you give it to one person does not deplete the amount you give to another person.
Leads to a pricing problem
Tension between static and dynamic efficiency
Competition causes prices = marginal cost
In extreme case, price = 0
Marginal cost pricing maximizes static efficiency
Price = marginal cost doesn’t cover fixed costs
Marginal cost pricing submaximizes dynamic efficiency
Any price that covers fixed costs is suboptimal in terms of static efficiency
Public goods tend to be underproduced and underutilized
Tragedy of the Commons – things held in common are overused and underinvested-in (oil fields & fish).
Privatization is the solution.
Tragedy of the Anti-commons – property rights that are too small and finely divided that it leads to hold-outs (e.g.s it’s impossible to sell the family farm after generations of subdivision, gene patents).
Public Choice Theory (as opposed to public interest theory): government actors base their decisions on individual incentives (e.g. increasing their budgets) so often times patents will not be thoroughly reviewed.
4 major economic justifications for intellectual property laws
o   Provides an incentive to invent by offering the possibility of reward to the inventor and to those who support him. This encourages the expenditure of time and private capit

false designation of origin; dilution (for famous marks)
Period of Protection
Until it becomes public knowledge
20 years from filing (utility)
Life of author + 70 years; “works for hire” minimum of 95 years after publication or 120 years after creation
Perpetual, subject to abandonment
Loss of protection
Right to patent lost if inventor delays too long after publishing before filing application; full disclosure is required as part of application; notice of patent required for damages
Notice and publication no longer required, but confer certain benefits
Notice optional; establishes prima facie evidence of validity, constructive knowledge of registration, confers federal jurisdiction, becomes incontestable after 5 years of continuous use, authorizes 3x damages and attorneys fees, and right to bar imports bearing infringing mark
Rights of Others
Independent discovery; reverse engineering
Only if licensed; can request reexamination of patent by Patent Office
Fair use; compulsory licensing for musical compositions, cable TV, et al.; independent creation
Truthful reflection of source of product; fair and collateral use (commenting, parody etc)
Costs of Protection
Security expenses; litigation costs
Filing, issue, and maintenance fees; litigation costs
None (protection attaches upon fixation).
Registration search; marketing product; litigation costs
Civil suit for misappropriation; conversion, unjust enrichment, breach of contract; damages (potentially 3x) and injunctive relief; criminal prosecution for theft
Injunctive relief and damages (potentially 3x); attorneys fees in exceptional cases
Injunction against further infringement; destruction of infringing articles; damages (actual or profits); statutory ($200-150,000); attorneys fees within the court’s discretion; criminal prosection
Injunction; accounting for profits; damages; attorneys fees in exceptional cases; seizure and destruction of infringing goods; criminal prosecution for trafficking in counterfeit goods or services