经济法外文翻译课件、在线看

Econ

522Economics

of

Law1Dan

QuintFall

2011Lecture

7Established

properties

of

an

efficient

property

law

systPrivate

goods

are

privately

owned,

public

goods

are

notOwners

have

maximum

liberty

over

how

they

use

their

propertyInjunctive

relief

used

when

transaction

costs

are

low, damages

used

when

transaction

costs

highWe

tried

“testing

Coase”

through

an

experimentCan

UW

undergrads

reallocate

poker

chips

efficiently?(Cost

me

$124)2Monday…Take

1:

Full

Information

(values

on

nametags)3Our

experiment…startingallocationefficientallocationactual

finalallocationfraction

of

potentigains

realized12red

chipred

chip10purple

chippurple

chip10purple

chippurple

chip8red

chippurple

chip8purple

chippurple

chip6purple

chippurple

chip6(sorry)4purple

chip4purple

chip2purple

chip32605826/28

=

93

%alTake

2:

Private

Information

(values

hidden)4Our

experiment…startingallocationefficientallocationactual

finalallocationfraction

of

potentigains

realized10red

chippurple

chip8purple

chippurple

chip8purple

chippurple

chip6red

chippurple

chip6purple

chipred

chip4purple

chippurple

chip43purple

chip3purple

chip2purple

chip24484218/24

=

75

%alTake

3:

Uncertainty5Take

4:

Adverse

SelectionOur

experiment…startingallocationefficientallocationactual

finalallocationfraction

of

potentigains

realized3

X

die

roll(actually

12)chipchip2

X

die

roll(actually

8)chip81212100

%alstartingallocationefficientallocationactual

finalallocationfraction

of

potentigains

realized3

X

die

roll(actually

18)chip2

X

die

roll(actually

12)chipchip1218120

%alCoase

works

pretty

well,

except

under

asymmetric

infoFull

info:

93%

of

gains

achievedPrivate

info:

75%Uncertainty:

100%Asymmetric

info:

0%Comparing

“uncertainty”

to

“asymmetric

info”…Seller’s

value

was

2

X

die

roll,

buyer’s

value

was

3

X

die

rollIf

nobody

knows

die

roll,

no

problem

–

they

can

trade

based

on

the expected

valueBut

if

seller

knows

die

roll,

problemIn

strategic

settings,

information

can

have

negative

value

– the

seller

could

be

worse

off

for

having

information!6Conclusion(old

exam

question,

question

by

Alex

Tabarrok

at

Marginal

Revolution

blog)In

Virginia,

the

commonlawhas

long

held

that

if

aneighbor’s

tree

encroaches

on

your

yard

you

may

cut

thebranches

as

they

cross

the

property

line,

but

any

damagethe

tree

does

to

your

property

is

your

problem.

Yourneighbor

can

even

sue

if

your

pruning

kills

the

tree.In

2007,

the

Virginia

Supreme

Court

overruled

this

70-yeaold

precedent,

making

it

your

neighbor’s

duty

to

prune

ocut

down

the

tree

if

it

is

a

“nuisance.”Which

is

better:

the

new

rule

or

the

old?

What

would

theCoase

Theorem

say

about

the

two

rules?7Discussion

questionMonday,

we

also

introduced

dynamic

games,

and

sequential

rationalityWhich

is

a

tool

we’ll

want

as

we

get

into

applications

of

property

lawApplications

ofProperty

Law8The

first

application

we’ll

consider

isanon-obvious

answer

to

the

question,

what

can

be

privately

owned?And

this

is

the

area

of

information

and

intellectual

propertyIntellectual

property

is

abroad

term

for

ways

that

an

individual,

or

afirm,

(or

a

university)

can

claim

ownership

of

information.There

are

four

areas

we’ll

look

at

within

information

economics:patents;

copyright;

trademark;

trade

secretsThe

first

application

we’ll

consider

isanon-obvious

answer

to

the

question,

what

can

be

privately

owned?And

this

is

the

area

of

information

and

intellectual

propertyIntellectual

property

is

abroad

term

for

ways

that

an

individual,

or

afirm,

(or

a

university)

can

claim

ownership

of

information.There

are

four

areas

we’ll

look

at

within

information

economics:patentscopyrighttrademarktrade

secretsIntellectual

property:

broad

term

for

ways

that

an

indivi or

a

firm,

can

claim

ownership

of

informationPatents

–

cover

products,

commercial

processesCopyrights

–

written

ideas

(books,

music,

computerprograms)Trademarks

–

brand

names,

logosTrade

Secrets9Intellectual

PropertyThe

general

“problem”

withinformation

is

that

it

tends

to

be

expensive

to

create,

but

then

very

cheap

to

disseminate

once

it’s

been

createdThat

is,

once

an

idea

has

been

developed–

whether

it’s

a

technological

innovation,

ora

song,

a

pieceof

software,

or

a

catchy

logo

for

acompany

–it

is

very

easy

to

imitateor

shareThis

means

that

without

some

sort

of

intervention,

it

may

be

impossible

for

whoever

developed

the

idea

to

recoup

the

costs

–

time,

effort,

andactual

money

invested

–

in

coming

up

withthe

ideaAnd

this

means

that

there

may

not

be

sufficient

incentive

to

come

up

with

ideas

in

the

first

placeTo

see

howthis

works,

consider

an

exampleThere’s

a

firm

that

has

some

idea

for

a

totally

newand

innovative

productIt’s

a

good

idea:

it’s

a

product

that

will

be

valuable

toa

large

number

of

peopleBut

it’s

an

idea

that

will

take

a

large

amount

of

money

to

develop;

and

it’s

also

an

idea

that,

once

it’s

out

there,

will

be

easy

for

other

firms

toimitate(A

good

example

of

this

is

a

newdrugA

huge

amount

ofmoney

goes

into

researching

drugs,

finding

one

that’s

effective,

testing

for

safety

and

for

side

effects,

and

so

onBut

once

a

drug

is

released,

it

may

be

very

easy

for

other

firms

to

reverse-engineer

it,

figure

out

how

to

make

it

relatively

cheaply,

and

competewith

the

firm

that

developed

it.So

now

suppose

a

firm

is

deciding

whether

to

make

the

initial

investment

in

developinga

new

drugThe

drugwill

cost

$1,000

to

developMonopoly

profits

in

the

market

would

be

$2500,

but

if

two

firms

are

competing,

then

price

competition

would

drive

down

profits

to

$450

eachOnly

one

firm

has

the

capability

to

develop

the

drug;

they

move

first,

decidingwhether

or

not

to

develop

it;

and

then

another

firmmoves

secondand

decides

whether

to

imitate

iteasy

to

imitateExample:

new

drugRequires

investment

of

$1,000

to

discoverMonopoly

profits

would

be

$2,500Once

drug

has

been

discovered,

another

firm

could

also begin

to

sell

itDuopoly

profits

would

be

$450

eachup-front

investment:

1,00010Information:

costly

to

generamotnoep,oly

profits:

2,500duopoly

profits:

450

eachWe

can

model

this

example

as

a

dynamic

game,

and

write

the

game

tree

this

way:Firm

1

moves

first,

and

chooses

to

innovate

or

not

toFirm

2

moves

second,

and

chooses

whether

ornotto

imitate

firm

1’s

productIf

firm

1

innovates

and

earns

monopoly

profits,

it

earns

$2500,

minus

the

up-front

costof

innovation($1000),

=

$1500If

firm

1

innovates

and

both

firms

enter

the

market,

duopoly

profits

are

$450

each,

but

firm

1

paid

the

up-front

cost

of

$1000

to

innovateIf

firm

1

doesn’t

innovate,

firm

2

has

nothing

to

imitate,

and

both

earn

0

profitsWe

can

solve

the

game

by

backward

induction…easy

to

imitateImitateDon’t(-550,

450)

(1500,

0)Solve

the

game

by

backward

induction:Subgame

perfect

equilibrium:

firm

2

plays

Imitate,

firm

1

plays Don’t

Innovate,

drug

is

never

discovered(Both

firms

earn

0

profits,

consumers

don’t

get

the

drug)FIRM

1

(innovator)Innovate

Don’tFIRM

2

(imitator)(0,

0)up-front

investment:

1,00011Information:

costly

to

generamotnoep,oly

profits:

2,500duopoly

profits:

450

eachA

patent

is

one

way

to

solve

this

problemA

patent

is

basically

a

legal

monopoly

–

a

patent

prevents

the

second

firm

from

imitating

the

first

firm’s

product,

allowing

the

first

firm

to

functionas

a

monopolist

for

a

predetermined

amount

of

timeIn

the

U.S.,

patents

last

20

years

from

the

timeof

application.So

if

the

firm’s

invention

were

be

protected

by

a

patent,

the

firm

can

count

onreceivingseveral

years

ofmonopoly

profits;

which

may

be

enoughto

cause

themto

innovate

in

the

first

place.(Modify

the

game

tree

by

imposing

a

large

penalty

on

the

imitating

firm

–

the

new

SPE

is

now

innovation.)Subgame

perfect

equilibrium:

firm

2

does

not

imitate;firm

1

innovates,

drug

gets

developedPatents:

one

way

to

solvethe

problemImitateDon’t(1500,

0)Patent:

legal

monopolyOther

firms

prohibited

from

imitating

Firm

1’s

discoveryFIRM

1

(innovator)Innovate

Don’tFIRM

2

(imitator)(0,

0)up-front

investment:

1,000monopoly

profits:

2,500duopoly

profits:

450

each(-550,

450)450

–

P12Comparing

the

two

outcomesFIRM

1

(innovator)InnovateDon’tFIRM

2

(imitator)ImitateDon’t(-550,

450)(1500,

0)(0,

0)up-front

investment:

1,000monopoly

profits:

2,500duopoly

profits:

450

eachFIRM

1

(innovator)InnovateDon’tImitateDon’t(-550,

450

–

P

)(1500,

0)(0,

0)With

patents:FIRM

2

(imitator)Drug

gets discoveredWithout

patents:Drug

never discoveredBut…13A

key

thingto

remember:

monopoly

is

inefficient!Monopolypricingalways

involves

a

deadweight

loss,

since

a

monopolist

maximizes

profits

by

setting

price

higher

than

marginal

costsFor

example,

suppose

demand

for

the

newdrug

is

Q

=100–

P

(DRAW

IT)Suppose

the

monopolist

has

0

marginal

costs;

then

he

sets

monopolyprice

at50,

sells

to

half

the

market,

gets

profit

of

2500

and

generatesconsumer

surplus

of

1250But

there’s

a

deadweight

lossof

1250

–

if

the

drug

were

sold

for

free,

it

would

generate

total

surplusof

5000

(all

of

it

goingto

consumers

in

thiscase)But

if

the

drug

were

goingto

be

sold

free,

orcheaply,

it

might

never

have

been

developed

in

the

first

placeSo

patents

trade

off

one

sort

of

inefficiency

for

another.That

is,

patents

solve

the

dynamic

inefficiency

–

not

enough

drugs

being

developed

–

byintroducinga

static

inefficiency

–

monopoly

pricing

oncethe

drug

has

been

developed(Of

course,

once

the

innovation

has

occurred,

the

incentive

problemhas

been

solved,

and

the

inefficiency

from

the

monopoly

remains,

and

cansometimes

look

pretty

undesirable.There’s

been

lots

of

talk

in

recent

years

about

the

costof

AIDS

drugs,

most

which

are

protected

by

patents.The

manufacturers

are

pricing

themhigh,

to

maximize

their

profits

or,

arguably,

to

recoup

the

investments

they

made

to

develop

the

drugs

in

thefirst

placeBut

it’s

hard

to

not

notice

that

pills

which

can

be

produced

ata

marginal

cost

of

pennies

are

priced

highenough

that

they

are

not

available

to

muchof

the

developing

world.There

have

been

anumber

of

proposals

to

try

to

make

themavailable

cheaply

(at

cost)

in

developingcountries,

but

the

challenge

is

how

to

dothat

without

undermining

profits

in

the

U.S.

and

Europe)by

introducing

anotherWithout

patents,

inefficient

outcome:

drug

not

developedWith

patents,

different

inefficiency:

monopoly!CS1,250Profit2,500P

=

50P

=

100

–

QDWL1,250CS4,050Profit 450

x

2P

=

10DWL50up-front

investment:

1,000Patents

solve

one

inefficiencmoynopoly

profits:

2,500duopoly

profits:

450

eachMonopolyNet

Surplus

=

2,750DuopolyNet

Surplus

=

3,950Q

=

50

Q

=

90Once

the

drug

has

been

found,

the

original

incentiveproblem

is

solved,

but

the

new

inefficiency

remains…14A

little

bit

of

historyThe

power

of

Congress

to

legislate

both

patents

and

copyrights

was

actually

written

into

the

ConstitutionThe

first

patent

lawwas

passed

in

1790,

and

has

been

updated

several

times

sinceAt

present,

patents

last

for

20

years

from

the

date

of

applicationTo

be

approved,

a

patent

application

must

satisfy

three

conditionsthey

must

be

for

something

which

is

novel

(new),

non-obvious,

and

has

practical

utility

(basically,

is

commercializable)Applications

are

reviewed

by

the

patent

office,

which

handlesa

huge

volume

and

is

therefore

sometimes

criticized

for

granting

patents

too

easilyIn

particular,

in

recent

years,

there’s

been

criticism

that

the

“non-obvious”

test

had

not

been

appliedAmazon,

for

instance,

was

granted

a

patent

on

“one-click

purchasing”,

which

manythought

was

an

obvious

extension

of

online

shopping.Apatentholder

who

feels

his

patent

has

beenviolated

can

sue

both

for

damages

already

done

and

for

an

injunction,

stopping

the

violator

fromfuture

violationsThus,

patents

are

protected

both

by

injunctive

and

damages

reliefPatentholders

are

also

free

to

license

their

patents

to

others,

that

is,

to

allow

others

to

use

themfor

afee

(called

aroyalty).When

you

apply

for

apatent,

the

details

of

your

innovationgo

into

the

public

record,

so

insome

industries,

firms

choose

not

to

patent

newinventions,

instead

choosing

to

keep

themsecret.First

U.S.

patent

law

passed

in

1790Patents

currently

last

20

years

from

date

of

applicationFor

a

patent

application

to

be

approved,

invention

must

bnovel

(new)non-obvioushave

practical

utility

(basically,

be

commercializable)Patentholder

whose

patent

has

been

infringed

can

sue

for both

damages

and

an

injunction

against

future

violationPatents

are

property

–

can

be

sold

or

licensed

to

others15Patents:

a

bit

of

historyOne

important

question:

howbroad,

orgeneral,

should

patents

be?

We

can

think

about

this

question

in

different

ways.First,

suppose

two

different

firms

are

developing

distinct,

but

similar,

productsIf

patents

are

fairly

narrow,

we

might

each

be

able

to

patent

our

own

invention,

regardless

ofwho

finished

firstThis

might

lead

each

of

us

to

develop

our

product

slowly,

trying

to

make

it

as

good,

oras

cheap,

as

possible,

knowing

we’ll

be

competingagainsteach

other

in

the

end

and

it

doesn’t

really

matter

who’s

firstIf

patents

are

very

broad,

then

if

I

finished

my

invention

first,

I

might

be

able

to

prevent

you

fromselling

yoursSo

in

a

world

with

broad

patents,

we

might

end

up

in

a

race–

both

of

us

try

very

hard

to

develop

the

product

very

quickly,

since

whoever

appliesfor

the

patent

first

will

get

all

the

gains

fromboth

productsSo

the

breadth

of

patents

affects

the

intensity

of

the

research

effortBut

it’s

not

clear

whichis

more

efficientNarrow

patents

might

allow

us

each

to

patent

own

inventioBroad

patents

might

not“Winner-take-all”

race

to

be

firstPatent

breadth16Another

way

to

think

of

breadth

is

to

suppose

that

a

new

product

might

require

two

distinct

innovations:

one

“pioneeringinvention”

that

is

worthlittle

on

its

own,

and

then

the

subsequent

development

of

an

application,

which

can

be

sold

profitablyThe

question

then

is,

doesa

patent

on

the

original

invention

also

cover

the

application?Or

would

separate

patents

be

required

for

the

pioneering

invention

and

the

application?(A

similar

question

can

be

asked

of

whether

an

improvement

to

an

existing

product

is

patentable.

The

question

can

also

be

asked

in

otherconfigurations.)Courts

have

sometimes

held

that

an

improvement

withgreat

commercial

value

does

not

infringe

on

a

pioneeringinvention

that

had

little

standalonevalueSuch

rulings,

of

course,

increase

the

incentives

to

invest

in

applications

and

improvements

to

existingtechnologies,

and

decrease

the

incentives

toengage

in

fundamental

researchOn

the

other

hand,

when

patents

on

pioneering

inventions

are

held

to

be

broad,

this

encourages

fundamental

research

but

discourages

new

firmsfromattempting

to

commercialize

existing(but

unexploited)

technologiesWhich

of

these

is

preferable

depends

on

the

details

of

aparticular

industry.

(Example:

drugcompany

patenting

small

improvement

right

before

original

patentexpires)Does

a

patent

on

the

“pioneering

invention”

cover

the application

as

well?Can

you

patent

an

improvement

to

an

existing

product?Patent

breadth17There

is

also

the

question

of

how

long

apatent

should

lastObviously,

patents

must

last

longenoughfor

firms

to

be

able

to

recover

their

investment

costs,

in

order

to

give

sufficient

incentives

for

innovationBut

since

monopolies

are

inefficient,

having

patents

last

too

longis

bad

–

once

the

patent

expires,

competition

will

drive

down

the

price

of

theproduct,

eliminating

the

deadweight

loss.(When

drug

patents

expire,

for

example,

competingfirms

can

beginsellinggeneric

versions

of

the

same

drug

–

the

book

gives

an

example

wherethe

price

per

pill

dropped

immediatelyfrom$15

to

$1,

and

I

think

that’s

pretty

typical.)So

the

optimal

length

is

a

tradeoff

between

maintaining

ex-post

inefficiencyversus

creating

a

sufficient

incentive

for

innovation.Clearly,

the

optimal

level

is

likely

to

vary

across

different

industriesIn

the

U.S.,

all

patents

last

the

same

amount

of

time,

20

yearsJeff

Bezos,

the

founder

of

Amazon,

proposed

that,

since

innovation

occurs

so

fast

in

the

software

industry,

software

patents

should

expire

after

3yearsIn

Germany,

there

are

two

different

types

of

patents:

full-term

patents,

which

are

granted

for

major

inventions;

and

petty

patents,

granted

forminor

inventions

and

improvements,

which

last3

yearsIn

addition,

in

Germany,

patentholders

must

pay

anannual

fee

to

continue

the

patent,

which

starts

out

cheap

but

escalates

over

timeIn

the

U.S.,

patents

used

to

be

renewable

under

certain

conditions–

I

believe

now

they

are

not.)Patent

lengthNeed

to

last

long

enough

for

firms

to

recover

up-front

investment……But

the

longer

patents

last,

the

longer

we

have

DWL

from monopoly(Example

from

textbook:

drug

price

drops

from

$15

to

$1

per

pill when

patentexpires)Tradeoff

between

ex-post

inefficiency

and

ex-ante

incentive provisionU.S.:

all

patents

last

20

yearsJeff

Bezos

(founder

of

Amazon)

once

suggested

software

patents should

last

just

3

yearsGermany:

full-term

patents

for

major

inventions,

3year“petty

pafor

minor

ones,

annual

renewal

feesPatent

length18Coase

–

in

a

world

without

transaction

costs,

the

initial

allocation

of

rights

should

not

matter

for

efficiency

–

if

the

patent

as

initially

granted

isinefficient,

firms

should

be

able

to

bargain

around

it(That

is,

as

longas

the

initial

grant

of

the

patent

gives

the

inventor

enoughsurplus

to

overcome

the

initial

incentive

problem,

Coase

suggests

weshould

be

able

to

negotiate

around

any

further

inefficiencies.)However,

there

are

several

impediments

to

this.Patent

lawis

often

ambiguousUntil

a

patenthas

been

testedin

court,

itsbreadth

(and

even

whether

or

notitis

valid)

are

often

uncertain

So

firms

may

notknow

what

theirthreat

points

are,

and

therefore

may

find

it

hard

to

reach

an

agreement

Research

itself

is

often

uncertainThat

is,

if

youmake

an

investment

in

research

or

in

developingaproduct,

it

is

often

unpredictable

whether

you’ll

be

successfulConsider

the

extreme

case

where

a

significant

investment

will

lead

onlyto

a

small

probability

of

a

discovery,

but

the

discovery

will

be

extremelyvaluable

if

it

occursIf

the

big

discovery

may

infringe

on

anexisting

patent,

it’s

very

hard

to

bargain

around

this

problembeforehand

–

hard

to

agree

on

how

likelythediscovery

is

to

be

made,

howvaluable

it

will

be,

and

so

onBut

it’s

also

risky

to

make

the

investment,

knowing

that

you

may

still

have

to

share

your

profits

withthe

other

patentholder

if

the

discovery

occurs.Coase:

without

transaction

costs,

initial

allocation

of irrelevant

for

efficiencyBut

transaction

costs

may

be

highUncertainty

on

whether

a

patent

is

validUncertainty

of

outcome

of

researchMany

parties19Do

the

details

matter?Insome

areas,

there

is

abelief

that

there

are

too

many

existingpatents,

and

that

it’s

very

difficult

to

innovate

without

infringing

on

existing

patentsIn

biotech,

many

new

projects

require

techniques,

or

even

ingredients,

that

are

patented;

so

there

isa

problemof

“royalty

stacking”,

that

is,

havingto

pay

multiple

monopolists

for

rights

to

their

good

in

order

to

do

anything

new(The

textbook

mentionsa

Congressional

act,

and

a

Supreme

Court

ruling,

meant

to

address

this

problemand

encourage

the

development

of

newdrugs

and

generic

alternatives

to

existingones.)On

the

flip

side,

I

havea

friend

who

does

microchip

design,

who

told

me

that

the

conventional

wisdomin

chip

design

is,

“Never

ever

try

to

findout

what

patents

exist

–just

design

the

chip

the

way

you

want

to,

and

deal

with

the

patents

later.”This

is

because

any

design

is

likely

to

infringe

on

lotsof

patentsTheir

owners

have

to

decide

to

sue

you

for

it

to

matterIf

they

do,

you

mayonly

be

liable

for

damagesBut

if

they

can

prove

you

knew

about

the

patent

beforehand,

the

penalty

may

be

more

severeSo

you’re

better

off

pleading

ignorance,

which

is

easier

when

you

actually

are

ignorant!Coase:

without

transaction

costs,

initial

allocation

of irrelevant

for

efficiencyBut

transaction

costs

may

be

highUncertainty

on

whether

a

patent

is

validUncertainty

of

outcome

of

researchMany

parties20Do

the

details

matter?researchbeingrisky

also

leads

to

the

problemof

“submarine

patents”There’s

a

significant

lag

(multiple

years)

between

applying

fora

patent

and

it

being

granted;

and

the

details

of

the

application

aren’t

made

publicuntil

the

patent

is

grantedSo

someone

could

develop

a

product

that

infringes

on

a

patent

that

hadn’t

been

granted

yet!For

this

reason,

in

many

areas,

patents

are

onlyvalid

if

you

can

show

that

you

were

actively

tryingto

commercialize

the

innovation,

not

justwaiting

around

hopingsomeone

else

would

do

the

work

and

then

sue

themfor

infringement(This

is

what

happened

in

awell-publicized

case

with

Blackberry

acouple

years

ago.

Some