Patent Pools - University of Wisconsin–Madison
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Transcript Patent Pools - University of Wisconsin–Madison
Econ 522
Economics of Law
Dan Quint
Spring 2014
Lecture 9
Monday
Introduced dynamic games, sequential rationality,
subgame-perfect equilibrium
Saw problem of innovation when ideas could be
appropriated or copied ex post
Introduced patents and copyrights as ways to solve
the problem
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patents
copyrights
trademarks
trade secrets
Copyright
Property rights over original expressions
writing, music, other artistic creations
Creations like this tend to fit definition of public goods
nonrivalrous
nonexcludable
so private supply would lead to undersupply
Several possible solutions
government subsidies
charitable donations
legal rights to creations – copyrights
Copyright
Copyright law less rigid than patent law
Unlike patent law, allows for certain exceptions
Copyrights last much longer than patents
Current U.S. law: copyright expires 70 years after creator’s death
No application process
Copyright law automatically applies to anything you’ve
written/created
Copyrights more narrow than patents
Cover exact text, not general idea
Copyright
Retelling of Gone With The Wind, from point of view of a
slave on Scarlett’s plantation, published in 2001
Margaret Mitchell’s estate sued to halt publication
Eventually settled out of court
Was there really any harm?
Copyright
Retelling of Gone With The Wind, from point of view of a
slave on Scarlett’s plantation, published in 2001
Margaret Mitchell’s estate sued to halt publication
Eventually settled out of court
Was there really any harm?
patents
copyrights
trademarks
trade secrets
patents
copyrights
trademarks
trade secrets
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Trademarks
Reduce confusion over who made a product
Allow companies to build reputation for quality
Don’t expire, unless abandoned
Generic names can’t be trademarked
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Trademarks – example
WSJ article 9/17/2010: “Lars Johnson Has Goats On His
Roof and a Stable of Lawyers To Prove It”
Restaurant in Sister Bay WI put
goats on roof to attract customers
“The restaurant is one of the topgrossing in Wisconsin, and I’m
sure the goats have helped.”
Suing restaurant in Georgia
“Defendant has willfully continued
to offer food services from
buildings with goats on the roof”
http://online.wsj.com/article/SB10001424052748704285104575492650336813506.html
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Trademark dilution
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One more example of dilution
In court papers, the oil behemoth effectively
argues that it owns the exclusive right to
put two X’s next to each other.
Deadline notes, “This double-cross brawl
may come as a surprise to Dos Equis…”
An FX spokesperson called the suit “entirely
meritless” and said,
“We are confident that viewers won’t tune
into FXX looking for gas or motor oil and
drivers won’t pull up to an Exxon pump
station expecting to get ‘It’s Always Sunny in
Philadelphia.’”
source: http://www.salon.com/2013/10/04/big_oil_loses_it_exxonmobil_claims_it_owns_the_letter_x/
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patents
copyrights
trademarks
trade secrets
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Trade Secrets
Protection against misappropriation
But plaintiff must show…
Valid trade secret
Acquired illegally
Reasonable steps taken to protect it
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patents
copyrights
trademarks
trade secrets
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Establishing, verifying, and
losing property rights
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When should resources become privately
owned?
We already saw two doctrines for how ownership rights are
determined – First Possession and Tied Ownership
Next question: when should a resource become privately
owned?
Cost of private ownership: owners must take steps to make the
resource excludable – boundary maintenance
Cost of public ownership: congestion and overuse
An economically rational society will privatize a resource at the
point in time where boundary maintenance costs less than the
waste from overuse of the resource.
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When should resources become privately
owned?
We already saw two doctrines for how ownership rights are
determined – First Possession and Tied Ownership
Next question: when should a resource become privately
owned?
Cost of private ownership: owners must take steps to make the
resource excludable – boundary maintenance
Cost of public ownership: congestion and overuse
An economically rational society will privatize a resource at the
point in time where boundary maintenance costs less than the
waste from overuse of the resource.
(either because congestion got worse…
or because boundary maintenance became cheaper)
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How do you give up (or lose) property
rights?
Adverse Possession (“squatter’s rights”)
If you occupy someone else’s property for long enough, you
become the legal owner, provided:
1. the occupation was adverse to the owner’s interests, and
2. the owner did not object or take legal action
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How do you give up (or lose) property
rights?
Adverse Possession (“squatter’s rights”)
If you occupy someone else’s property for long enough, you
become the legal owner, provided:
1. the occupation was adverse to the owner’s interests, and
2. the owner did not object or take legal action
Pro: clear up uncertainty over time; allow land to be put to use
Con: owners must incur monitoring costs to protect property
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How do you give up (or lose) property
rights?
Adverse Possession (“squatter’s rights”)
If you occupy someone else’s property for long enough, you
become the legal owner, provided:
1. the occupation was adverse to the owner’s interests, and
2. the owner did not object or take legal action
Pro: clear up uncertainty over time; allow land to be put to use
Con: owners must incur monitoring costs to protect property
Estray statutes – laws governing lost and found property
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Limitations and Exceptions to
Property Rights
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Private Necessity
Property rights generally protected by injunctive relief,
BUT…
Ploof v. Putnam (Sup. Ct. of Vermont, 1908)
Ploof sailing with family on Lake Champlain, storm came up
Tied up to pier on island owned by Putnam
Putnam’s employee cut the boat loose, Ploof sued
Court sided with Ploof: private necessity is an exception to the
general rule of trespass
In an emergency, OK to violate someone else’s property
rights; still must reimburse them for any damage done 23
Private Necessity
Property rights generally protected by injunctive relief,
BUT…
Ploof v. Putnam (Sup. Ct. of Vermont, 1908)
Ploof sailing with family on Lake Champlain, storm came up
Tied up to pier on island owned by Putnam
Putnam’s employee cut the boat loose, Ploof sued
Court sided with Ploof: private necessity is an exception to the
general rule of trespass
In an emergency, OK to violate someone else’s property
rights; still must reimburse them for any damage done 24
Unbundling
Property: “a bundle of rights”
Can you unbundle them?
Separate them, sell some and keep others
Usually, no
Prohibition on perpetuities
I can’t separate the right to own/live on my land from the right to sell
it or turn it into a golf course
But in some instances, yes…
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Example of unbundling: Pennsylvania and
coal
Land ownership consisted of
three separable pieces
(“estates”)
Surface estate
Support estate
Mineral estate
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Unbundling
Free unbundling of property rights generally not allowed
Civil law more restrictive than common law
For efficiency…
In general, efficiency favors more complete property rights
People would only choose to unbundle property when that
increases its value, so we should allow it?
But unbundling might increase transaction costs
Increases uncertainty about rights
May increase number of parties involved in future transactions
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An example (sort of) of unbundling
source: http://articles.nydailynews.com/2009-08-24/news/17934480_1_ebay-auction-crypt-marilyn-monroe
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More on
Remedies
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Remedies (review)
Maximum liberty: owner can do whatever he/she wants,
as long as it doesn’t interfere with another’s property
When it does interfere, externality, or nuisance
Affects small number: private externality, or private bad
Transaction costs low injunctions preferable
Affects large number: public externality, or public bad
Transaction costs high damages preferable
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Types of damages
Compensatory Damages
intended to “make the victim whole”
compensate for actual harm done
make victim as well off as before
Can be…
Temporary – compensate for harms that have already occurred
Permanent – also cover present value of anticipated future harm
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Temporary versus permanent damages
Temporary damages
Only cover harm that’s already happened
Require victim to keep returning to court if harm continues
Create an incentive to reduce harm in the future
Permanent damages
Include value of anticipated future harm
One-time, permanent fix
No incentive to reduce harm as technology makes it easier
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Efficient nuisance remedies
If a nuisance affects a small number of people (private
nuisance), an injunction is more efficient
If a nuisance affects a large number of people (public nuisance),
damages are more efficient
If damages are easy to measure and innovation occurs rapidly, temporary
damages are more efficient
If damages are difficult/costly to measure and innovation occurs slowly,
permanent damages are more efficient
What’s done in practice for public nuisances?
temporary damages and injunction against future harm
but…
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Boomer v Atlantic Cement Co
(NY Ct of Appeals, 1970)
Atlantic owned large cement plant near Albany
dirt, smoke, vibration
neighbors sued
plant was found to be a nuisance, court awarded damages
neighbors appealed, requesting an injunction
Court ruled that…
yes, this was a valid nuisance case
and yes, nuisances are generally remedied with injunctions
but harm of closing the plant was so much bigger than level of
damage done that court would not issue an injunction
ordered permanent damages, paid “as servitude to the land”
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Boomer v Atlantic Cement Co
(NY Ct of Appeals, 1970)
Atlantic owned large cement plant near Albany
dirt, smoke, vibration
neighbors sued
plant was found to be a nuisance, court awarded damages
neighbors appealed, requesting an injunction
Court ruled that…
yes, this was a valid nuisance case
and yes, nuisances are generally remedied with injunctions
but harm of closing the plant was so much bigger than level of
damage done that court would not issue an injunction
ordered permanent damages, paid “as servitude to the land”
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Next: two important limitations on property
rights imposed by government
Government can limit how you use your property
Regulation
The government can take your property
“Eminent domain”
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