Public Choice Perspectives on Intellectual Property Alex Tabarrok - PowerPoint Presentation

Public Choice Perspectives on Intellectual Property Alex Tabarrok Dourado , E., & Tabarrok, A. 2015. Public choice perspectives on intellectual property. Public Choice , 163(1): 129–151.

Virginia and Bloomington School Perspectives The Virginia school: constitutional economics + theory of government failure. The Bloomington school: the opportunity of the commons.

It is better to…abolish [monopolies], in all cases, than not to do it in any. ….[people say that] ingenuity is spurred on by the hope of a monopoly for a limited time, as of 14. years; but the benefit even of limited monopolies is too doubtful to be opposed to that of their general suppression. Jefferson to Madison, 31 July 1788 Thomas Jefferson

With regard to monopolies they are justly classed among the greatest nuisances in Government. But is it clear that as encouragements to literary works and ingenious discoveries, they are not too valuable to be wholly renounced? Would it not suffice to reserve in all cases a right to the Public to abolish the privilege at a price to be specified in the grant of it? Is there not also infinitely less danger of this abuse in our Governments, than in most others? Monopolies are sacrifices of the many to the few…Where the power, as with us, is in the many not in the few, the danger can not be very great that the few will be thus favored… Madison to Jefferson, 17 Oct. 1788 James Madison

From Constitutional Moment to Politics Without Romance (or that didn’t take long) The Copyright Act of 1790 appears to have been written not by a member of Congress, but by Noah Webster! Webster, the author of numerous textbooks and, of course, the famous dictionary had traveled throughout the states getting copyright laws passed at the state level—he was also influential in getting copyright into the constitution although he wanted perpetual copyright. Noah Webster

From Constitutional Moment to Politics Without Romance (or that didn’t take long) Noah Webster Cousin Daniel Webster would later get Noah a congressional exemption on duties for imports of his book. Noah and Daniel Webster were also key players in the 1831 extension of copyright from 14 to 28 years. Daniel Webster in the Senate was joined by Oliver Ellsworth in the House. Ellsworth was Noah’s son-in-law and so stood to gain personally from copyright extension as Noah aged!

The Political Economy of IP The original copyright law gave foreign authors no protection! U.S. freely “ripped off” foreign authors. Not until 1891 did US offer foreign authors protection and only if they had their books printed in the United States! Interesting dynamics. Publishers had to pay US authors but not foreign authors. As the U.S. become a greater producer of IP some US authors began to think of the failure to “protect” foreign authors as a subsidy to competitors. Protection of foreign IP thus became a case of raising rival’s costs.

The Romance is Gone Copyright act gradually increased in scope but in 1975 the term of protection was still only 28 years, renewable for another 28 years. In 1976, Congress extended terms to the life of the author plus 50 years. In 1998, copyright terms were extended yet again to life plus 70 years.An extension opposed by George Akerlof, Kenneth Arrow, Ronald Coase, Milton Friedman, and James Buchanan!

Why? One possibility can be found in the Virginia school maxim—concentrate benefits, disperse costs. In the 20th century we saw the rise of large firms that owned millions and sometimes billions of dollars’ worth of intellectual property.

Patents Public Choice has focused on legislatures—with less being said about the role of the judiciary or its organization. In 1982, at the urging of the patent bar, Congress consolidated appellate review of patent cases in a newly created Court of Appeals for the Federal Circuit.The “Federal Circuit” has been patent friendly, increasing scope of patents.Creation of Fed. Circuit coincides with steep increase in number of patents.

PatentsRecent Supreme Court cases – battle to retake control over patents from the Federal Circuit. Why differences among the courts? Capture of the Federal Circuit by the Patent bar? Why not capture of SC?

The Opportunity of the Commons A commons can provide collective benefits that are available only at much higher cost using other forms of property management. The intellectual commons is a fountainhead that does not run dry, a source of ideas to build upon, revise, mix, combine, and develop.

The intellectual commons is super- Lockean because when IP law is well designed, those who draw from the commons eventually also supply the commons with new material from which others may draw. Thus , when IP law is well designed, those drawing on the intellectual commons leave more and better for everyone else. John Locke

Since the IP Commons is Super-Lockean. The free riders who need to be monitored are not those who use the commons (the public domain) but those who fail to refill the commons.Walt Disney drew heavily on the common stock of fables and fairy tales but it has not refilled the commons.The free rider is not the prospective user of Mickey Mouse or Donald Duck but Disney which has free ridden on the stock and not contributing to the refilling.

The Destruction of the Commons Had the pre-1976 rules been in place each of the following works would be available in the commons today for all to rework, mix, combine, alter, or expand. Under current copyright law, none of these works will enter the public domain until 2052.

The Rent-Seeking Society

Thank you Dourado, E., & Tabarrok, A. 2015. Public choice perspectives on intellectual property. Public Choice, 163(1): 129–151.