INSITE's next research seminar will feature guest F. Scott Kieff, Professor of Law at Washington University and a Senior Fellow at the Hoover Institution at Stanford.
This free talk will be held in Grainger Hall, room 2167 at 3:30 PM on Tuesday, February 17, 2009.
Paper Abstract
Property rule treatment of intellectual property (IP) is said to cause excessive transaction costs, thickets, anticommons, hold-ups, hold-outs, and trolls, unduly taxing and retarding innovation, competition, and economic growth. The popular response has been to offer a shift towards some limited use of weaker, liability rule treatment, usually portrayed as "just enough" to facilitate transactions in those special cases where the bargaining problems are at their worst and where escape hatches are most needed. This paper is designed to make two contributions. First, it shows how through a set of changes over just the past few years, the patent system has been hugely re-shaped from a system having several major, and helpful, liability-rule-pressure-release-valves, into a system that is almost devoid of significant property rule characteristics.
The paper then explores some harmful effects of this shift, focusing on the ways liability rule treatment can seriously impede the beneficial deal-making mechanisms that facilitate innovation and competition. The basic intuition behind this bad effect of liability rules is that they seriously frustrate the ability for a market-challenging patentee to attract and hold the constructive attention of a potential contracting party (especially one that is a larger more established party) while preserving the option to terminate the negotiations in favor of striking a deal with a different party. In this way, the paper is designed to contribute to the literature on IP in particular, as well as the broader literatures on property and coordination, by first showing how a seemingly disconnected set of changes to the legal rules impacting a particular positive law regime like patents can have unintended and sweeping consequences, and then exploring why within the more middle range of the spectrum between the two poles of property rules and liability rules, a general shift towards the property side may be preferred by those seeking an increase in access and competition.
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