What We’re Reading: Landes & Posner’s “Economic Structure of Intellectual Property Law”

by on August 23, 2004 · 8 comments

Along with William Landes, the stunningly prolific Richard Posner is the author of a marvelous new book on “The Economic Structure of Intellectual Property Law.”

Posner, who is guest blogging this week over on the Lessig Blog is one of the great legal minds of our generation and everything he has to say is worth listening to. That is certainly true of this timely new book he has written on IP issues with Landes.


Landes and Posner take a hard look at the economic underpinnings of copyright, patent and trademark law and provide a Coasian analysis of what works and what doesn’t. Landes and Posner teach us to think about IP issues in terms of transaction costs to help us understand the cost and benefits of IP protection. You won’t find any argument in this book premised upon a “moral rights” foundation, rather, they devise formal economic models to rationalize and critique IP law.

Landes and Posner are justly skeptical of many of the recent expansions of IP law, copyright in particular. They highlight some of the more misguided congressional enactments of recent decades, including the remarkably stupid Architectural Works Protection Act of 1990, a measure they too generously label “a dubious extension of copyright protection.” This measure allows for the copyright of “the overall forms [of the building] as well and the arrangement and composition of spaces and elements.” This is just silly. Every building owes at least a little something to a previous building design. 90 percent of the skyscrapers in most major cities share a lot of common attributes and are difficult to distinguish beyond their overall height. At the other end of the spectrum, what about trailer park homes? Their design really hasn’t changed much since introduced decades ago. While there haven’t been many suits under the Act so far, one can only imagine what a can of worms Congress could be opening if they start allowing aesthetics to be copyrightable. (They’ve granted protection to boat hull designs in recent years too! Can automobile body styles or clothing fads be far behind?)

My favorite section of the Landes and Posner book begins on page 41 of Chapter 2, which discusses “Factors That Would Limit Copying Even in the Absence of Copyright Law.” While they are certainly not IP anarchists, Landes and Posner make a powerful case for reconsidering how well IP law works, or at least considering some important changes at the margin. Chapter 8 on “The Optimal Duration of Copyrights and Trademarks” also includes an important reform proposal to abandon the existing “Life +70 years” approach and instead substitute a system of renewable copyright terms. Although I like the idea of moving to system that requires copyrights to be renewed every 20 years or so, I still think it should probably be capped at some point (perhaps life of the author).

What I like best about their book is their general skepticism about Congressional meddling in these matters. I have suggested elsewhere that it might even be time for a moratorium on any new statutory law on the copyright front. We should let the courts enforce what is already on the books and balance competing interests instead of asking Congress to rush to legislate on every new copyright dispute that arises. As Posner and Landes note:

“On the whole… the judge-made parts of intellectual property law seem pretty efficient; it is not the judges who are to be blamed for setting the copyright and patent terms, abolishing copyright renewals in favor of a single very long term, importing moral rights doctrine into the copyright statute, or making buildings as well as building plans copyrightable. As in previous economic analyses of judge-made law, we have noted numerous instances of economic ingenuity displayed in judge-made rules and judicial decisions.”

I think this hits the nail right on the head. In general, I believe that the legislative extremes of either banning or imposing particular technologies or business models to solve IP disputes should be avoided. Intellectual property plays a vital role in our modern Information Age economy, but we should not adopt a “by-any-means-necessary” approach to copyright enforcement. And we should not seek to ban or mandate technologies or technological solutions to every dispute that pops up. Targeted, court-based adjudication of clear-cut copyright infringement is the better way to balance the interests of consumers and creators.

The only thing missing from the Landes-Ponser book is a discussion of compulsory licensing, which is very much needed here since compulsory licenses are always proposed as the legislative quick-fix for technology-related copyright disputes. While favored by many on the “Copy Left,” compulsory licenses are little more than forced contracts with price controls to boot; they require content providers to license their products to others at a government-regulated rate. I think markets can sort this stuff out as this recent paper by Robert Merges shows.

In sum, I highly recommended Landes and Posner’s new book for anyone looking to gain a better understanding of the complicated economic of IP law and find creative solutions to some of the most vexing disputes lawmakers face today.

  • Grant Gould

    One renewal regime which ought seriously to be considered (both for copyrights and for patents, in my view) is one in which renewal fees are exponentially increasing multiples of the price of a single sensibly-licensed copy of the good.

    This would impose the highest fees on the works and inventions that intuition tells us should be the least encumbered: Old works and works which the author or inventor declines to license at economically efficient prices.

    For instance, the copyright fee on an ordinary novel might be its list price for the first five years, twice that for the next five, four times that for years ten to fifteen, and so forth. Patents might work the same way but with a one year rather than five year renewal period, at least until the bright day when independent reinvention is legalized and patents can move to a term more comparable to that of copyright.

    All this would result in a large number of “abandoned” works either becoming avaliable cheaply or falling into the public domain, and at the same time end the emerging and parasitic practice of patenting things to prevent them from being built rather than to profit from them.

  • Adam Thierer

    Grant… These are interesting suggestions and it reminded me that such a proposal for graduated or tiered terms of protection was put forward a few years ago by Jeff Bezos of Amazon for business method patents.

    As you may recall, Bezos had quite a spat with Tim O’Reilly over Amazon’s “one-click” business method patent. O’Reilly and others made a fairly powerful case that the patent should have never been granted. To his credit, Bezos responded to the critics and acknowledged that some high-tech patents should probably not received the same term of protection. He sent an open letter to O’Reilly advocating shortening the life span of software patents to three to five years instead of 17 as well as helping to improve the PTO’s “prior art” search capabilities before granting such patents in the first place. See this old Wired story for more details:

    http://wired.com/news/technology/0,1282,34887,00.html

    I’m not sure anything ever came of all this, but it would be worth exploring. One obvious problem, however, is: What standard do we use to determine term length for one type of industry or technology versus another? Why should software only be 3-5 years while drug companies get 20? And on the copyright front, one might ask why a copyright owner should be forced to renew – - for an increasing fee no less – - every few years. I think the idea still has merit, but someone needs to sweat the details here and justify the plan.

    For more details on the “one-click” spat, see the O’Reilly site: http://www.oreilly.com/news/patent_archive.html

  • Grant Gould

    One renewal regime which ought seriously to be considered (both for copyrights and for patents, in my view) is one in which renewal fees are exponentially increasing multiples of the price of a single sensibly-licensed copy of the good.

    This would impose the highest fees on the works and inventions that intuition tells us should be the least encumbered: Old works and works which the author or inventor declines to license at economically efficient prices.

    For instance, the copyright fee on an ordinary novel might be its list price for the first five years, twice that for the next five, four times that for years ten to fifteen, and so forth. Patents might work the same way but with a one year rather than five year renewal period, at least until the bright day when independent reinvention is legalized and patents can move to a term more comparable to that of copyright.

    All this would result in a large number of “abandoned” works either becoming avaliable cheaply or falling into the public domain, and at the same time end the emerging and parasitic practice of patenting things to prevent them from being built rather than to profit from them.

  • Adam Thierer

    Grant… These are interesting suggestions and it reminded me that such a proposal for graduated or tiered terms of protection was put forward a few years ago by Jeff Bezos of Amazon for business method patents.

    As you may recall, Bezos had quite a spat with Tim O’Reilly over Amazon’s “one-click” business method patent. O’Reilly and others made a fairly powerful case that the patent should have never been granted. To his credit, Bezos responded to the critics and acknowledged that some high-tech patents should probably not received the same term of protection. He sent an open letter to O’Reilly advocating shortening the life span of software patents to three to five years instead of 17 as well as helping to improve the PTO’s “prior art” search capabilities before granting such patents in the first place. See this old Wired story for more details:

    http://wired.com/news/technology/0,1282,34887,0

    I’m not sure anything ever came of all this, but it would be worth exploring. One obvious problem, however, is: What standard do we use to determine term length for one type of industry or technology versus another? Why should software only be 3-5 years while drug companies get 20? And on the copyright front, one might ask why a copyright owner should be forced to renew – - for an increasing fee no less – - every few years. I think the idea still has merit, but someone needs to sweat the details here and justify the plan.

    For more details on the “one-click” spat, see the O’Reilly site: http://www.oreilly.com/news/patent_archive.html

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