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Type: Working Paper
Author: Gordon, Wendy J.; Bone, Robert G.
Date: 2001
URI: https://hdl.handle.net/10535/3880
Sector: Theory
Information & Knowledge
Subject(s): law
intellectual property rights--economics
public goods and bads
transaction costs
Abstract: "Copyright is the branch of Intellectual Property Law that governs works of expression such as books, paintings and songs, and the expressive aspects of computer programs. Intellectual products such as these have a partially public goods character: they are largely inexhaustible and nonexcludable. Intellectual Property Law responds to inexcludability by giving producers legal rights to exclude nonpayers from certain usages of their intellectual products. The goal is to provide incentives for new production at fairly low transaction costs. However, the copyright owner will charge a price above marginal cost and this, coupled with the inexhaustibility of most copyrighted products, creates deadweight loss. Various copyright doctrines (such as the idea/expression dichotomy, the limited duration of the copyright ownership term and the doctrine of 'fair use') work to reduce deadweight loss and other costs within a larger structure that creates incentives. Copyright Law, unlike Patent Law, gives owners rights only against those who actually copy the work. This limitation, too, may serve to reduce both transaction costs and deadweight loss. Empirically it is unclear how successful copyright has been in creating incentives for production, reducing transaction costs and keeping deadweight costs low."

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