Introduction Outline

01. Introduction to Intellectual Property

MML 1-39

Introduction

• Returns from intangible assets, amounts to 20% contribution private sector to GDP, e.g. software, movie, music, advertising

• E.g. Backpack Kid suing Fortnite for using Floss Dance Move – Whether Fornite or the Backpack kid be earning profit? Should Backpack Kid be protected?

  • Financially/ morally wrong for Fortnite profiting without seeking permission

  • Want people to create work that we value and other people can have access to it by giving protection = creator have power to lock the creation from others

  • Should we give creator strong control over things they created?

  • Whether the dance move is of that value: statistically valuable, level of creativity

  • Commercializing the dance move vs. making videos

• E.g. a scientist who got traditional teas from Peru with HIV inhibiting properties, spent 10 years to modify and improve the tea tries to register to sell the drug another company figured the formula and manufacture it 10% of the price should the second company be stopped?

  • Yes: have to protect the first co. as it spent a lot of resources to benefit the society;

  • No: other companies might have also spent many resources; what is their incentive – intrinsic/ extrinsic reason? Whether law is needed to protect them? Good for society to have a lower price

  • Issue: how much should we give, price/ time control?

  • Peruvians: created the tea, whether give credit to them financially

• E.g. Nirvana suing Marc Jacobs for t-shirt designs

  • Marc Jacobs making additional contribution?

  • Would people would think MJ are collaborating with Nirvana – would consumers be confused, more willing to buy MJ due to this? MJ benefit from Nirvana without permission? Unfair competition? Should we allow trademark law to step in?

Intangible assets vs. tangible assets – what distinguishes Intellectual Property from real property?

IP is about the intangible

1. Intangible assets have unique attributes:

   • Public goods – everyone can benefit without paying

     • cannot be appropriated (unlike real property)

     • don’t become depleted when used - ideas don’t lose value the more you use them (unlike real property, e.g. pencil)

     • Thomas Jefferson: idea is a public good by nature

       • “If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself, but the moment it is divulged, it forces itself into the possession of everyone, and the receiver cannot dispossess himself of it.”

   • Non-rivalrous

     • One person’s use doesn’t exclude others from using it

     • Cannot, in nature, be exclusive

     • Unpredictable until a certain point, but up to a point, it would be easy for other to access to it

     • very little value once other people figured out

     • Jefferson: “He who lights his taper at mine receives light without darkening me. Public goods can not, in nature, be exclusive.”

   • Low or zero costs of reproduction or dissemination

2. There is a labor/ novelty prerequisite for intangible assets

3. Intangibles assets are typically much harder to describe

   • E.g. writing a book – create a character + may lack vocabulary to describe it

Theories of IP Rights - Philosophical Reasons for Protection of Intellectual Property

1. Natural rights perspective:

   1. Lockean labor theory:

      • Goods are held in common – given to humanity for enjoyment – but most cannot be enjoyed in natural state – need to convert into Property

[Person + human labor + nature = private property]

1. Every man has a property of his own ‘person’

2. The labour of his body and the work of his hands, are properly his - inventor/ author is entitled to the social benefits produced by his efforts

   • “Whatsoever, then, he removes out of the state that Nature hath provided and left it in, he hath mixed his labor with it, and joined to it something that is his own, and thereby makes it his property.”

3. Proviso: a person should not be allowed to take more than he needs

   • “no prejudice to any other man, since there was still enough and as good left … for he leaves as much as another can make use of does as good as take nothing at all”

   • Robert Nozick “Whether the owner of a can of tomato juice who dumps it into the ocean can thereafter claim ownership of all the high seas”

• IP law often don’t measure whether a person is entitled to protection due to amount of labor

  • E.g. a person who filmed a news footage incidentally is protected despite little labor; vs. no protection over a lot of labor, e.g. inventor did a lot of work is not protected if the invention already exist

2. Personality theory - Hegelian personhood theory:

   • To become a self-actualize person – to achieve proper self-development/ to be a person, an individual needs more control over resources in the external environment

   • Most people possess object that they feel are almost part of themselves, e.g. wedding ring, home these objects are closely bound upon the person because they are part of the way we constitute ourselves as continuing personal entities in the world

   • Personal vs. fungible

     • personal: would feel bad even if replaced when lost, e.g. wedding ring

       • creativity, typically more covered by copyright, moral rights

     • fungible: doesn’t matter which bill you get, anyone would do, $ bill, drug

       • inventions more typically covered by patent, should we allow creators to assign their rights

2. Utilitarian/ Economic Incentive Perspective:

   • Upfront investments – second-comers can enter and compete without development cost drive down costs to reproduction – making first-comer unable to recover costs if so, first-comer would be unwilling to develop new intangible assets

   • IP law is to incentivize the developers by giving exclusive rights to profit from it

   • Developers create socially useful work, in return for the power to control the market for that work [But: providing exclusive rights means less people can afford/ have access = developer getting surplus from this]

   • What if the developer would have create it anyhow (even without protection)?

   • How to create incentive for the first comer without stopping the second-comers?

   • IP law compromise encouraging incentive and encouraging competition

   • US constitution: Congress has the power “to promote progress of science and useful arts, by securing for limit times, to authors and inventors, the exclusive rights to their writings and discoveries” Aim to protect knowledge, culture, art that are useful, by granting exclusive right for a limited time

   • How do IP laws accomplish this goal?

     • compromise between encouraging incentives and encouraging competition

   • Promoting innovation and creativity:

     1. economic incentive benefit

     2. costs of limiting diffusion (spreading)

     • principal objective is to enrich public at large (second consideration: reward inventor/ author)

       • [Not trying to make companies better off, but to benefit the public = provide the greatest good to the greatest number]

       • aim to generates speech

   • Ensuring integrity of the market place – trademark

     • trademark doesn’t protect innovation/ creativity directly, but it protect the integrity of the marketplace by prohibiting the use of marks associated with particular manufacturers in ways that would cause confusion as to the sources of the goods reduce consumer confusion + enhance incentives for firms to invest in activities that improve brand reputation

Policies to Promote Innovation

1. Government R&D subsidies:

   • gov fund projects, allow competitors to step in and copy what has been done. But government may not be as good as the market to judge how much is to be funded/ what projects should be funded

2. Post-development payoffs

3. Intellectual property

4. Secrecy

   • e.g. process of making a drug – only need output

OR

1. no protection at all?

2. contracts – one on one?

3. state of the art limitations?

4. special-purpose technical limitations?

Note: since all businesses produce and consume IP stronger IP protection can also hurt companies – they may also want to use other’s work

Behavioural assumptions

• whether always true that people would not create if they are not protected

• whether public think it is wrong to copy

IP Overview

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