A fundamental critique of the law-and-economics analysis of intellectual property rights*

I. INTRODUCTION: SOME MAJOR PROBLEMS WITH AN ECONOMIC ANALYSIS OF INTELLECTUAL PROPERTY LAW II. THE ECONOMIC THEORY OF INTELLECTUAL PROPERTY RIGHTS PROVIDED BY LAW-AND-ECONOMICS III. TRADE MARKS IV. PATENTS V. COPYRIGHT VI. THE RELEVANCE OR IRRELEVANCE OF A LAW-AND-ECONOMICS ANALYSIS OF LEGAL INSTITUTIONS TO INTELLECTUAL PROPERTY LAW AND MORAL CONSEQUENCES VII. CONCLUSION "Die Schriftstellerei wird erst durch den Erfolg als freier Beruf moglich; der Erfolg sagt jedoch nichts uber den Wert einer Schriftstellerei aus, er deutet allein darauf hin, dass der Schriftsteller eine Ware herstellt, die sich verkaufen lasst: Dass dieser Umstand nicht befriedigt, sei zugegeben." (1) (Writing becomes only possible as an independent profession because of the success; but the success reveals nothing about the value of the writing, it only indicates that the writer produces a commodity which can be sold: that this fact is not satisfactory must be conceded.) Friedrich Durrenmatt (1921-1990), Swiss writer and playwright I. INTRODUCTION: SOME MAJOR PROBLEMS WITH AN ECONOMIC ANALYSIS OF INTELLECTUAL PROPERTY LAW The economic analysis of law and legal institutions, or the law-and-economics movement, originally a distinct North American phenomenon that emerged in the 1960s, (2) has become a widespread tool for a certain conceptualisation and understanding of legal problems. Prominent representatives of the law-and-economics approach especially regard intellectual property as a "natural field for economic analysis of law." (3) Since its inception, this form of analysis has been met with suspicion, as it was felt that law-and-economics tried to take over other social sciences and establish a kind of "economics imperialism." (4) This criticism has to be taken seriously because the law-and-economics analysis does not only reconceptualise otherwise dissimilar fields of knowledge in a rather unrecognisable way to the "home-grown" researchers of the other fields, it also alters, deforms, or even destroys the object of research because it has a strong normative element, even where it presents itself as purely descriptive (5) or (which amounts to the same) "positive." (6) This is particularly true of intellectual property law as the research object of an economic analysis because all areas of law have developed their long-standing and highly elaborate methodology and do not need a new one, developed for an entirely different discipline, to describe their objects of research. (7) The purpose of an economic analysis can only be a change of current legal institutions and decisions according to perceived superior economic considerations, so every law-and-economics analysis is ultimately normative. (8) Otherwise, it would be superfluous for economists because they take legal institutions (e.g., the legal institutions of contract and property, or regulatory rules) for granted when they seek to explore market phenomena and economic behaviour, and it would be superfluous for lawyers because they have their own conceptual and scholarly frameworks of legal institutions and decisions. The law-and-economics approach, seeking to belong to economics as well as to law but arguably belonging to neither, engrafts economic research methods on law; it wants to provide a scientific theory to predict the effect of legal sanctions on behaviour, whereby these sanctions are conceptually simplified as prices because people are supposed to respond to sanctions in the same way as to prices. Economics then claims to have mathematically precise theories (e.g., price theory, game theory) and empirical methods for the analysis of the effects of prices on behaviour. (9) The ways of modelling, also mathematical modelling, are controversial within economics itself, (10) but the complexities of human economic behaviour and of the causes and effects of human endeavours require a simplification through modelling which enables scientific findings. …