Summary Law and Economics - Arsilla Chairunissa - 2006606832 PDF
Summary Law and Economics - Arsilla Chairunissa - 2006606832 PDF
Summary Law and Economics - Arsilla Chairunissa - 2006606832 PDF
2006606832
FH UI KKI 2020
Assignment: Summary of Analysis Economics of Law
With the rise of the law and economics movement, the focus of economic analysis of intellectual
property has begun to shift to more concrete and manageable issues concerning the structure and
texture of the complicated pattern of common law and statutory doctrines, legal institutions and
business practices relating to intellectual property. Among the issues discussed in this paper are the
length of protection for intellectual property, the rules that allow considerable copying of intellectual
property without permission of the originator, the rules governing derivative works, and alternative
methods of providing incentives for the creation of intellectual property. The emphasis is on copyright
law, which, perhaps because of its complex legal structure and the relative neglect by economists of
the arts and entertainment, has tended to be slighted in the conventional economic analysis of
intellectual property, relative to patent law, where economic analysis can draw on an extensive
literature concerning the economics of innovation.
The large ratio of fixed to variable costs of such property is what causes the tension between
incentives and access that dominates the usual economic study of intellectual property. Although it is
frequently quite expensive to create intellectual property, once incurred
Calculating the optimal reward is difficult, however. It can in principle be calculated after the
fact on the basis of the commercial success of the intellectual property, but the resulting delay in
reimbursement of the originator will increase the difficulty of financing intellectual-property projects.
A greater danger is that the reward system will be politicized. The property rights approach
proportions the creator’s return on investment to the commercial success of the invention or
expressive work automatically. A trademark is a method of economizing on consumer search costs by
providing a compact identifier of a particular producer’s brand. So long as the producer continues to
sell the brand, maintaining a more or less consistent quality so that consumers are not deceived, the
trademark serves its identifying function. Trade secrets have no fixed term, because the only legal
protection that trade secrecy confers is protection against the unlawful appropriation of confidential
information, as by theft or a breach of contract.
Typically, a specific item of physical property can only be used by one individual at a time.
The law shouldn't make it possible to borrow someone else's property without first agreeing on the
terms with the owner because doing so costs the owner money because they are no longer able to use
it, and in that situation, transaction costs are usually not too high. The "theft" of intellectual property
does not deprive its owner of use, unlike the "theft" of physical property. In fact, piracy could raise the
income for the original owner if some of the pirates' clients buy the owner's application programs or if
growing the owner's user base gives them a network edge over rival software developers. Insofar as
the law is driven by efficiency concerns, the public good nature of the intellectual property and the
greater transaction costs of exploitation of such property lead to the prediction that property rights in
intellectual property will be less extensive than in the case of physical property. The fair use doctrine
is proof that the forecast is correct.
The distinction in legal standing between derivative works and improvement patents is further
explained by an institutional gap between copyright and patent law. There is a claim of copyright, but
no preliminary administrative examination to ascertain the originality of the work is conducted.
Contrarily, the Patent and Trademark Office's screening of patent applications has the effect of making
it unlikely for a patent to be issued if an improvement patent does not actually represent an
improvement. Therefore, there is a risk of proliferation of independently owned derivative works,
which would significantly raise the transaction costs of producers of follow-up derivative works, if
derivative works are not under the legal control of the owner of the original copyright. It mentioned
before that it was debatable whether copyright was necessary for distinctive works of art, like
paintings, given that copies are subpar replacements. However, copyright does allow the creator to
make additional money from derivative works.
Thus, allowing copyright protection for paintings boosts artists' pay and, presumably, the
supply of art. If it were considered that works of art conferred external benefits—which there is no
evidence they do—then policy might boost economic welfare. The larger argument is that, unless the
supply of copyrighted works is regarded to be suboptimal, allowing the copyright owner control over
derivative works cannot be justified on the grounds that it enhances the income of copyright owners.
In recent decades, the scope of intellectual property rights protection has increased.
One factor for this is the sharp decline in the quality-adjusted cost of (and delay in) As a result
of digitization, copying has increased; the most well-known example is computer file sharing
of music with a copyright. The more affordable copying is, the harder it is for the to cover
fixed costs in the amount the owner charges for the original work copies, unless the owner can
stop rivals from offering copies for sale. The social value of a work that requires a large
upfront investment, which is the defining characteristic of intellectual property, increases
because the incremental cost of providing the work to more customers is reduced as a result of
the expanding number and growing wealth of consumers worldwide as well as the fact that
declining costs of disseminating intellectual property have brought more and more of the
global market within reach of producers of such property. The social cost of violating
intellectual property rights is larger if there are less incentives for people to produce these
works, leading to a reduction in the quantity and quality of such works due to inexpensive
copies and a lack of intellectual property protection.