[Guest Book Review] Research Handbook on the Economics of Intellectual Property Law

Gracing my desk is the Edward Elgar “Economics of Intellectual Property Law”, edited by Ben Depoorter, Peter Menell and David Schwartz. The book, encompassing two volumes, is a collection of chapters written by various authors looking at key economic issues in IP law.

To start, I would like to highlight that there are only ten female authors, eight Michaels and five Christophers, out of 62 total authors. This should be unacceptable. [This Kat agrees, this is totally unacceptable, there is a plethora of female experts in IP that could have contributed. See WIPW.org if you need to meet some].

To continue, the various chapters are well-written and accessible, suffering neither from the citation-heavy writing of law nor the cumbersome style common to the lexicon of economics. Readers will benefit from having a decent understanding of IP law, but only minimal economic or knowledge of empirical analysis is required. Notably, there are few graphs, charts or equations. Volume 1 takes a theoretical approach and applies it to areas of interest, such as innovation and international trade. Volume 2 addresses analytical methods and provides the background information for theoretical models and the understanding of empirical data.

The cover claims the book is ‘field defining’, but the question is what field. The summary says it covers economic theory and analytical methods with respect to IP. However, out of the 62 total authors, 51 have “Law” either in their title and/or department affiliation, meaning that only 11 do not. Thus, the vast majority of the authors work primarily as legal scholars, with some holding degrees in both law and economics.

This is not a problem per se, but the book is more accurately described as a Chicago School Law and Economics cum empirical legal studies book. [Merpel notes the Chicago School is a mainstream, if not doctrinal, approach to economics that has defined the field of Law and Economics, which itself is microeconomic theory applied to law, but increasingly law-dominated in its analysis. Empirical legal studies is the quantitative analysis of legal topics but need not include economics.] The title and description instead imply the “economics of IP”, which suggests something broader, so as to include the economics of innovation, Industrial organisation and cultural economics (a field of economics focused on arts and literature).

Richard Posner, a founder of the Law and Economics field, and an editor of the entire Elgar series, is a template of scholars in this area, being primarily a jurist with an interest in economics and who has worked closely with full-scale economists (e.g., the late Professor Gary Becker from the University of Chicago, another key figure in the Law and Economics field.) I make this point because economists have been, and continue to be, criticised for having insufficient understanding of IP law and their works discounted as a result. A similar criticism can be levelled at this book, replete, as it is, with law scholars with an interest in economics.

For example, take some of the copyright chapters, such as “Economics of Collective Management” (by Daniel Gervais), “Copyright and Emerging Creative Industries (by Sean A. Pager) and “The effect of copyright law on access to works” (by Paul Heald). While they cover key points, they focus on the legal literature with only limited engagement with the economics literature and the work by cultural economists is largely excluded. Many of the book’s chapters can be equally critiqued.

A chapter on the philosophical foundations of IP law, with a focus on the tension between economics and law (by Robert P. Merges), provides a fascinating journey through the oft-unexamined assumptions of IP law and its economic analysis. It critiques the combination of faith in the economy-wide (macro) IP system and a utilitarian (greatest good for the greatest number of people) approach, describing it as a, “… working theoretical orientation of many US IP scholars. They take the macro case as more or less given, and then proceed to look for the best available data to help answer questions about the details of the IP system.” (V1, p. 77) This is perhaps most true in government economists. The chapter also provided an excellent framework for understanding different approaches to IP in, for example, policy lobbying (e.g. the classic tension between rightsholders and economists.)

The chapter, and indeed much of the book, is somewhat limited by its humanities roots, as it engages largely with a narrow definition of economics as applied to an equally narrow selection of IP (mostly economics of patents, with some consideration of copyright and a nod to other topics.) It therefore misses some of the evolution of economics in the last decades, such as its interaction with other social sciences (management, political economy).

The chapter co-authored by the late Suzanne Scotchmer (an economist) with Peter Menell (a law academic), “Economic Models of Innovation”, is one of the few chapters that includes equations and graphs, in keeping with Scotchmer’s highly regarded book, “Innovation and Incentives”. This chapter provides a good overview of key innovation aspects of IP and their policy levers, such as threshold, breadth, duration, and remedies.

The second volume, focussing on analytical methods, volume would be more accurately described as dealing with empirical legal studies rather than economics. For example, in the chapter, “Empirical Studies of Copyright Litigation”, Mathew (?) Sag argues,

“Empirical studies of copyright litigation appear to be quite unlikely to displace traditional doctrinal studies. However, they have the potential to augment those studies by injecting some rigor into causal empirical observations and by identifying patterns of behaviour and judicial decision making that might otherwise go unnoticed.” (V2, p. 529)