Law & Economics Working Papers
Though they derive from the same constitutional source of law, patents and copyrights vest very differently. Patents arise only after an applicant successfully navigates a cumbersome and expensive examination, while copyrights arise costlessly upon mere fixation of a work in a tangible medium of expression. Each of these vesting systems has drawn much criticism. Some scholars argue that the patent examination system imposes heavy costs while failing to eliminate invalid patents. Each of these claims, though, fails to take into account the social benefits (or costs) associated with the screening mechanism (or lack thereof) required for owners to perfect their rights. The social-welfare implications of process costs have been studied in other settings, but largely ignored in the intellectual property (IP) literature. In this Article, we leverage the insights of this literature to craft a novel theory showing why the much-maligned patent and copyright vesting systems are actually socially beneficial. Our analysis rests on a descriptive account of how patents and copyrights create differential social and private values, and shows that costly screens select differently across the classes of value in each of these cases, so that process costs are warranted in the patent setting but undesirable for copyright. Finally, we abstract the insights of this paper to generate two more general insights about law. First, we illustrate how this analysis of costly screens generates a broader account of how law does and should govern processes for vesting IP rights. In so doing, we offer a novel and unified theory of IP process. Second, we explore how our discussion of process costs in the IP setting illuminates the underappreciated benefits and costs of screens in other areas of law.
Jonathan Masur & David Fagundes, "Costly Intellectual Property" (Coase-Sandor Institute for Law & Economics Working Paper No. 596, 2012).