Title

On the Economics of Copyright, Restitution and 'Fair Use': Systemic Versus Case-by-Case Responses to Market Failure

Document Type

Article

Publication Date

1997

ISSN

0729-1485

Publisher

University of Tasmania

Language

en-US

Abstract

The 'public goods' characteristics possess by intangible works of authorship and invention present the basic market failure problem usually relied on to justify intellectual property rights. What is ordinarily less emphasized is that such market failure is no more than half of the prerequisite for an economically desirable copyright or patent system: another requisite condition is that there be less costly market imperfections after intellectual property is instituted than there would have been in the absence of the intellectual property regime. Intellectual property rights are best justified in the presence of "asymmetric market conditions", that is where (1) in the absence of intellectual property rights, there will be market failure; and (2) in the presence of intellectual property rights, there will be market success.

This article compares areas of copyright law in which systemic rules have been used to minimize market imperfections and to further market formation with other areas of copyright in which doctrines such as the fair use doctrine and notions of reasonableness have been used to develop case by case solutions. In particular, the article examines whether face to face refusal to license can ever constitute the kind of market failure which would justify refusing to enforce an intellectual property right. The latter problem arises when copyright owners try to suppress hostile or unorthodox adaptations of their work. The devise of "asymmetric market conditions" is also used to examine the presumption within restitution law that people who refrain from crossing others' tangible boundaries are free to take advantage of each other's labor. The article then uses the same conceptual tools to explain why intellectual property law reserves this presumptive freedom and replaces it with a duty not to copy.

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