Escolar Documentos
Profissional Documentos
Cultura Documentos
William M. Landes
and
Richard A. Posner
Landes, William M.
The political economy of intellectual property law / William M.
Landes and Richard A. Posner.
p. cm.
Includes bibliographical references.
ISBN 0-8447-7176-7 (pbk.)
1. Intellectual property—Economic aspects—United States.
2. Social choice—United States. I. Posner, Richard A. II. Title.
KF2979.L364 2004
346.7304'8—dc22
2004010290
10 09 08 07 06 05 04 1 2 3 4 5
v
Foreword
T
he 2002 AEI-Brookings Joint Center Distinguished Lecture
Award was given to Richard Posner. The purpose of this
award is to recognize an individual who has made major
contributions to the field of regulation and related areas. Senior
members of the Joint Center select the distinguished lecturer based
on scholarly and practical contributions to the field. The lecturer is
given complete latitude in choosing a topic for the lecture.
Judge Posner is one of the greatest original thinkers of our time.
He has been and continues to be a towering intellectual giant in the
field of law and economics—indeed, most scholars in the field
learned from one of the editions of his pathbreaking textbook on the
subject. In addition to making seminal contributions to the fields of
regulation and antitrust, Judge Posner has written important works
in a number of areas, including intellectual property, moral and legal
theory, and law and literature.
This monograph, coauthored with Professor William Landes,
focuses on the expansion of intellectual property law over the last
half century. It first describes the expansion and then seeks to explain
it. In so doing, it explores a fundamental, unresolved issue in the the-
ory of regulation: why some kinds of regulation have increased dra-
matically over this period while others have virtually disappeared.
Like all Joint Center publications, this monograph can be freely
downloaded at www.aei-brookings.org. We encourage educators to
use and distribute these materials to their students.
vii
The Political Economy of Intellectual
Property Law
T
he principal task we set for ourselves in this paper is to
explain the expansion in intellectual property protection
over the last fifty years or so and, in particular, the rapid
growth that began, roughly speaking, with the 1976 Copyright Act.
We also seek to understand why this expansion occurred in dis-
similar ways across different types of intellectual property. To cite
two examples, we find that the statutory expansion in copyrights
has been more rapid than in either patents or trademarks, and that
patent protection has grown in part as a result of the decisions of a
court (which has no counterpart in other areas of intellectual prop-
erty) that has exclusive jurisdiction over patent appeals.
The paper is organized as follows. Part I presents empirical evi-
dence regarding the growth in intellectual property protection over
the past fifty years. Part II reviews the theory of “public choice,”
which models the political and governmental process as the product
of demand and supply factors, particularly the ability of interest
groups to overcome free-rider problems. Part III applies public-
choice theory to the growth and character of intellectual property
protection.
This paper is an expanded version of a talk that Posner gave as an AEI-
Brookings Joint Center Distinguished Lecture on November 19, 2002,
which was based on chapter 14 of Landes and Posner, The Economic
Structure of Intellectual Property Law (Harvard University Press, 2003).
1
2 INTELLECTUAL PROPERTY LAW
FIGURE 1
INTELLECTUAL PROPERTY STATUTES AND U.S. CODE
TABLE 1
GOVERNMENT EXPENDITURES ON PROCESSING COPYRIGHT,
PATENT, AND TRADEMARK APPLICATIONS
Costs 2000 2001 2002
Copyright
Total $37,485,014 $38,438,249 $40,896,000
Per registration $72.70 $63.89 $78.48
Patent
Total $781,300,000 $882,500,000 $1,022,300,000
Per application $2,506 $2,560 $2,902
Trademark
Total $130,000,000 $134,100,000 $138,700,000
Per application $438 $576 $669
Application Fees
Copyright $30
Patent $600
Trademark $300
SOURCE: Patent and trademark program costs are found on p. 50 of the Annual Report of the
United States Patent and Trademark Office in the section entitled “Results of Operations.”
NOTES: (1) Trademark applications refer to the number of individual applications. There
are, however, forty-seven different classes of items in which a trademark may be regis-
tered, and some individuals request registration in multiple classes. Total applications,
including additional classes, are about 30 percent greater than individual applications.
The per-application trademark uses individual applications not including application to
register for additional classes of goods. (2) The patent fee is a weighted average of the
$750 fee and $375 small entity fee with the weights equal to 0.6 and 0.4, respectively
(based on the relative share of small entity applications).
FIGURE 2
RATIO OF REGISTRATIONS OR GRANTS TO WORDS
20
15
Ratio
10
5
0
CopRatio PatRatio
TmRatio
slightly, can increase its net profits, provided free riding does not
destroy the cartel), can be overcome if the benefits of the collective
effort required to get the legislation enacted are great and the costs
either are small or, if large, are either widely diffused or imposed on
politically impotent groups. These conditions are most likely to be
satisfied if the legislation is backed by (but not opposed by) a com-
pact interest group that has a lot to gain from the legislation.13
Public-choice theory has had only limited success in explain-
ing political behavior and government action. Limited is not zero;
the theory has made significant contributions to our understand-
ing of public utility and common carrier regulation, certain other
forms of regulation including occupational licensure and other
labor-market (including safety and health) regulation, and tariffs.
But it has not, for example, succeeded in explaining the forces that
brought into being the system of property rights that is fundamen-
tal to a capitalist economy. Can it say anything about the extension
of that system to encompass intellectual property and the spurt in
intellectual property protection that we have dated to the 1976
copyright statute?14 We find it helpful to approach the question by
first considering another trend that began at roughly the same time:
the deregulation movement.
Beginning in the late 1970s and continuing almost to the pres-
ent day, a number of important industries in the transportation,
communications (including broadcasting), energy, and financial-
services (including banking) sectors—industries that until then
had long been subject to comprehensive public regulation, mainly
of the public utility or common carrier variety—were wholly or
entirely deregulated. Significant partial deregulation occurred in
other industries, including legal services. Probably the greatest suc-
cess of public-choice theory has been in explaining the pattern of
regulation that existed before deregulation took hold. Public-choice
theory showed that the principal effect of such regulation was to
bring about or shore up producers’ cartels, and it identified the
demand and supply factors that explained the success of some
producers and the failure of others in obtaining such regulation.
Those factors turned out to be much the same, as we have
12 INTELLECTUAL PROPERTY LAW
and perhaps even in the expansion of that law in recent decades. Not
even the most dyed-in-the-wool public-choice theorist would be
likely to deny that many laws serve the public interest or, more pre-
cisely, serve a conception (quite possibly erroneous) of the public
interest rather than the interest of some narrow interest group. Many
of these theorists would further concede that interest-group pres-
sures are not always necessary to procure the passage of efficient leg-
islation or the formulation by judges of efficient common law rules.
It is hard to believe, for example, that interest groups are necessary
for the enactment of laws protecting property rights or punishing
criminal behavior. If the benefit-cost ratio is high enough, collective
action becomes feasible, even in the absence of interest groups.
Harold Demsetz, an economist distinctly unsympathetic to public
interest explanations of legislation, nevertheless argued that the rise
of property rights was due not to the machinations of interest groups
but to rising scarcity that had increased the value of property rights
relative to the costs.31 He did not propose a causal mechanism con-
necting a perceived increase in the social benefits of a property rights
system with its adoption via the political process but such theories
exist. In Joseph Schumpeter’s theory of democracy,32 for example,
politicians vie for office by offering voters attractive policies in much
the same way that sellers of ordinary goods vie for sales by offering
consumers attractive terms. If they fail to deliver, they may be voted
out of office, as happened to Jimmy Carter in 1980 and George Bush
in 1992. The perceived ineffectuality of Democratic Party politicians
to repress crime was a factor in the defeat of Democratic presidential
candidates in 1968 and the 1980s. If property rights and crime
suppression are important to enough voters, successful politicians
will supply these goods without the promptings or pressures of
interest groups. Mention of Carter is particularly apropos because his
defeat was due in significant part to the “stagflation” of the 1970s.
Advocates of expanding intellectual property rights argued that, by
increasing the pace of innovation, such an expansion would help to
bring the nation out of the economic doldrums.
If we think about the history of intellectual property law
since the Middle Ages, we can, just as with Demsetz’s theory of the
WILLIAM M. LANDES AND RICHARD A. POSNER 21
applications, all of which require lawyer input. And the patent bar
pressed strongly for the new court, though there was some internal
tension owing to the fear by patent lawyers outside of Washington,
D.C., that the centralization of patent appeals in Washington
would give the D.C. patent bar a competitive advantage.41 The cre-
ation of the court, whose specialized character and resulting “mis-
sion” orientation enabled a prediction that it would favor patents
more than the generalist federal appellate courts, may thus have
been a consequence largely of interest-group politics.
Notes
29
30 NOTES TO PAGES 8–12
individual from new legislation does not decline as the size of the interest
group grows. If, for example, both the marginal benefits and average cost
declined proportionately as the group expanded, the interest group would
not commit additional funds to press for new legislation.
9. Growth rates are estimated from logarithmic regressions and t-statistics
are in parentheses. Data on trademarks and copyrights are from 1946 to
2000, whereas data on patent grants are from 1960 to 2000. Trademark
and copyright growth rates from 1960 to 2000 (0.042 and 0.025) are about
the same as in the 1946–2000 period. The differences between the growth
rates for trademarks and copyright and trademarks and patents are highly
significant at the 0.001 level, while the difference between copyright and
patents is insignificant.
10. A point cutting the other way, however, is that, with more and more
direct selling to consumers (for example, of software), owners of intel-
lectual property can use contract law to protect their property and do not
need to rely on copyright law. Copyright law is important where the
would-be copier has no contractual relation with the copyright owner
because he has purchased the copyrighted work from a retail store or
other middleman.
11. For useful summaries of public-choice theory, see Robert D. Cooter,
The Strategic Constitution (2000); Daniel A. Farber and Philip P. Frickey, Law
and Public Choice: A Critical Introduction (1991); Jonathan R. Macey, “Public
Choice and the Law,” in The New Palgrave Dictionary of Economics and the
Law, vol. 3, p. 171 (Peter Newman ed. 1998).
12. In contrast, intellectual property is an excludable public good.
13. On the role of interest groups in public policy, see, for example,
George J. Stigler, The Citizen and the State: Essays on Regulation (1975);
Stephen P. Magee, William A. Brock, and Leslie Young, Black Hole Tariffs and
Endogenous Political Theory: Political Economy in General Equilibrium (1989);
Richard A. Posner, “Theories of Economic Regulation,” 5 Bell Journal of
Economics and Management Science 335 (1974).
14. These are not the only questions about intellectual property law that
public-choice theory might be able to shed light on. Josh Lerner, “150 Years
of Patent Protection,” 92 American Economic Review Papers and Proceedings
221 (May 2002), finds that patent protection is greater in wealthier and
more democratic countries than in poorer and less democratic ones.
Wealthy countries are more likely to be producers as well as consumers of
intellectual property, creating a demand for intellectual property protection;
and democratic countries are more hospitable to innovative thinking than
less democratic ones.
15. As argued in Steven K. Vogel, Freer Markets, More Rules: Regulatory
Reform in Advanced Industrial Countries, chapter 1 (1996).
NOTES TO PAGES 12–18 31
29. Caching refers to the temporary copy that an Internet service provider
makes of transmitted material on a local server so that the subscriber can,
after looking at the material, look at it again by clicking “Back” on a brows-
er rather than by having to get it transmitted via long distance from the orig-
inal sender.
30. A list of the cases is available from the authors.
31. See Harold Demsetz, “Toward a Theory of Property Rights,” 57 Ameri-
can Economic Review Papers and Proceedings 347, 350–53 (May 1967).
32. See Joseph A. Schumpeter, Capitalism, Socialism, and Democracy, chap-
ters 22–23 (1942), reprinted as chapter 9 of Political Philosophy (Anthony
Quinton ed. 1967). For a summary of his theory, see John Medearis, Joseph
Schumpeter’s Two Theories of Democracy (2001); for an elaboration of it, see
Richard A. Posner, Law, Pragmatism, and Democracy, chapters 4–6 (2003).
33. See Bruce W. Bugbee, Genesis of American Patent and Copyright Law
(1967); Frank D. Prager, “Historic Background and Foundation of
American Patent Law,” 5 Journal of Legal History 309 (1961); Irah Donner,
“The Copyright Clause of the U.S. Constitution: Why Did the Framers
Include It with Unanimous Approval?” 36 American Journal of Legal History
361 (1992).
34. See Duncan Matthews, Globalising Intellectual Property Rights: The
TRIPS Agreement, chapter 5 (2002). Evidence concerning these and other
benefits of intellectual property rights protection to developing countries is
summarized in Keith E. Maskus, “Intellectual Property Rights and
Economic Development,” 32 Case Western Reserve Journal of International
Law 441, 478–88 (2000).
35. See, for example, Terry L. Anderson and D. R. Leal, Free Market
Environmentalism (1991); Symposium, “The Law and Economics of
Property Rights to Radio Spectrum,” 41 Journal of Law and Economics 521
(1998); Elisabeth Krecké, “Environmental Policies and Competitiveness,”
16 Homo Oeconomicus 177 (1999). For other references, see Elinor Ostrom,
Governing the Commons: The Evolution of Institutions for Collective Action
12–13 (1990).
36. Friedrich A. Hayek, Individualism and Economic Order, 114 (1948).
37. See Landes and Posner, The Economic Structure of Intellectual Property
Law, chapter 12.
38. This was a principal theme of our book The Economic Structure of Tort
Law (1987). See also Richard A. Posner, Economic Analysis of Law (6th ed.
2003), especially part 2, and Frontiers of Legal Theory, chapter 1 (2001). The
term common law requires definition, however. In its narrowest sense, it
refers to the bodies of law administered by the common law courts of
England in the eighteenth century and thus excludes admiralty law, domes-
tic relations law, and equity jurisprudence. In a broader sense, it refers to
NOTES TO PAGES 26–27 33
any body of law that is judge created. In its broadest sense, and the one in
which we use it in this book, it refers not only to judge-created bodies of
law but also to judge-created doctrines that fill gaps or resolve ambiguities
in statutes or constitutions. In this sense, much of antitrust law, much of
constitutional law, and much of patent and copyright law are common law.
As mentioned in the text, several areas of intellectual property law are
common law in the second sense as well, statutes being absent or merely
codifications of common law principles.
39. The main trademark statute, the federal Lanham Act, is quite detailed,
but many of its most significant provisions merely codify judge-created
doctrines, such as functionality, 15 U.S.C. § 1053(e)(5), or the nontransfer-
ability of a trademark “in gross,” that is, without the assets for making the
trademarked product. Id., § 1060.
40. See Landes and Posner, chapter 12; and our article “An Empirical
Analysis of the Patent Court” (forthcoming in University of Chicago Law
Review).
41. See Cecil D. Quillen, Jr., “The U.S. Patent System: Is It Broke? And
Who Can Fix It If It Is?” 18–19 (unpublished, May 11, 2001); Quillen,
“Innovators, Innovation, and the U.S. Patent System” 7–10 (unpublished,
October 17, 2002).
About the Authors
35
Executive Director In order to promote public understanding of the
Robert W. Hahn impact of regulations on consumers, business, and
government, the American Enterprise Institute and
Director the Brookings Institution established the AEI-
Robert E. Litan Brookings Joint Center for Regulatory Studies. The
Joint Center’s primary purpose is to hold lawmak-
Fellows ers and regulators more accountable by providing
thoughtful, objective analysis of relevant laws and
Robert W. Crandall
regulations. Over the past three decades, AEI and
Christopher C. DeMuth Brookings have generated an impressive body of
Judith W. Pendell research on regulation. The Joint Center builds on
Scott J. Wallsten this solid foundation, evaluating the economic
Clifford M. Winston impact of laws and regulations and offering con-
structive suggestions for reforms to enhance pro-
ductivity and welfare. The views expressed in Joint
Center publications are those of the authors and do
not necessarily reflect the views of the Joint Center.
37