My research over the last few years has focused on various topics involving the law and economics of intellectual property law, and how intellectual property law interacts with other regulatory frameworks such as competition law and pharmaceutical regulation. Through most of my work I have applied insights from conventional economic literature to various questions in intellectual property law and its allied disciplines, often arriving at unconventional conclusions.
Below you will find a more detailed description of my various research projects, including links for downloading my papers.
Collective Administration of Copyrights
I have written several papers on the collective administration of copyright.
- In 2005, I published the first in a series of two articles examining the collective administration performing rights. The first article titled: “The Potential Demise of Another Natural Monopoly: Rethinking the Collective Administration of Performing Rights,” published in the Journal of Competition Law and Economics, Vol. 1, No. 3, pp. 541-593, challenged the accepted view that performing rights organizations are the most efficient method for licensing, monitoring and enforcing those rights. It argued that the case for PROs is not as straightforward as it is assumed to be. It showed that many of the underlying cost efficiencies that are attributed to PROs are usually simply assumed and, in many cases, could be equally achieved under alternative arrangements that are less restrictive of competition.
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- In 2006, I published a companion article titled: “The Potential Demise of Another Natural Monopoly: New Technologies and the Administration of Performing Rights.” The article, published in the Journal of Competition Law and Economics, Vol. 2, No. 2, pp. 245-284, demonstrated how, by lowering many of the transaction costs which previously purported to justify the collective administration of performing rights, new digital technologies further undermine the justification for collective administration. It also discussed whether market forces alone would transform the market into a competitive one, considered possible continuing roles for existing performing rights organizations, and compared the Canadian and the U.S. regulatory approaches to determine how conducive they are to such change.
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- “Monopoly and Competition in the Collective Administration of Public Performance Rights”, in Hebrew, published in Din Udvarim – Haifa Law Review, Vol. 2, No. 3, p. 551, applies the insights developed in the previous two articles to the Israeli context and also examined two models for the regulation of performing rights organizations that have been recently proposed in Israel, regulation under the general provisions of the competition law and regulating under a specific legislative framework. The models were examined to determine their respective strengths and weaknesses in restraining performing rights organizations’ market power and in facilitating the transition from monopoly to competition.
- In March 2007 I was invited to comment on a study authored by Jacques Robert on the Canadian copyright collectives system in a symposium on competition law and intellectual property organized by the Competition Bureau. My comment was published in a volume containing the symposium’s proceedings, edited by Michael Trebilcock, David Vaver and Marcel Boyer.
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- In June 2007 I participated in a conference named “Working within the Boundaries of Intellectual Property”, organized by the Engelberg Center on Innovation Law and Policy of New York University Law School. In this conference I presented a paper titled “Copyright Collectives: A Good Solution, But for Which Problem?” The paper summarizes many of the issues that I identified in my previous writing on copyright collectives, but also expands to discuss the collective administration of copyrights in areas other than musical performing rights. Thus, it sketches many of the issues that I intend to study in greater detail in the next few years. This paper appears in “Working within the Boundaries of Intellectual Property”, Harry First, Rochelle Dreyfuss, Diane Zimmerman, eds., Oxford University Press, 2010.
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Antitrust, Intellectual Property and Market Power
“Making Sense of Nonsense: Antitrust, Intellectual Property, and Market Power”, was published in Vol. 49 of the Arizona Law Review in 2007. The article contributes to the debate about the nature of intellectual property (IP) rights and the connection between IP rights and market power. While the economic rationale for IP rights rests on the concepts of monopoly or market power, the US Supreme Court, in Illinois Tool Works v. Independent Ink, has recently joined a “virtual consensus” among antitrust commentators believing that no presumption of market power should exist in antitrust cases involving IP. This article critically analyzes this consensus. It clarifies the relationship between IP and market power, shows why IP rights often do confer market power in the antitrust sense, but explains why acknowledging this should not necessarily lead to excessive application of antitrust law to IP.
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Copyright and Time
“Substitution and Schumpeterian Effects over the Lifecycle of Copyrighted Work”, published in 2009 in Jurimetrics, develops two key insights. First, copyrighted works are affected by two types of competitive forces: substitutive competition and Schumpeterian competition. Second, the relevant magnitude of each of these competitive forces changes at various points over the lifecycle of copyrighted works. The earlier stages of a work’s lifecycle are dominated by substitution effects, whereby many other works can function as very close substitutes. As the work develops to a full product, to which many other inputs have been added, it becomes less easily substitutable. This process intensifies as network effects of various kinds secure successful works’ market position and render them less vulnerable to competition from close imitations. The competitive threat to which such works may be exposed becomes more Schumpeterian in nature: competition from other works which offer something new, and potentially preferable. Generally, copyright law unequivocally discourages merely substitutive competition, but is much less interested in discouraging Schumpeterian competition. This Article’s time-based analysis provides both a justification for this distinction, as well as grounds for evaluating various existing rules and doctrines. It suggests that broader copyright protection (perhaps broader than the current protection) may be desirable at the early stages of works’ lifecycle, whereas narrower protection (perhaps narrower than the current) may be justified at later stages.
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The Effects of Software Piracy
“A Network Effects Perspective on Software Piracy”, was published in the University of Toronto Law Journal, Vol. 55, pp. 155-216 in 2005. The article explains why software companies frequently complain about the losses caused by software piracy but why surprisingly, many of them do not employ any technological measures to reduce the levels of piracy. The first part of the article demonstrates how not protecting software can be a profitable strategy. It explains that tolerated piracy is a form of cross-sectional price discrimination in which the lower tiers of customers do not pay for their software. In the face of network effects that exist in many software markets, such a strategy achieves the most expeditious and widest dissemination of software, maximizes the value of the network, may accelerate the tipping of the market in favor of the more dominant publisher and later create higher barriers to entry. The article analyzes the advantages of such implicit price discrimination over explicit price discrimination and the strategic advantages of complaining about piracy over preventing it. Software piracy can also enable dynamic pricing in a multiple-period setting. At a second stage, due to a lock-in phenomenon, software publishers are able to hold-up potential ex-pirates who face a threat of litigation and charge them higher prices. The second part of the article analyses whether and to what extent legal doctrines, particularly in competition and copyright law should take account of the insights developed in the first part.
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Innovation, Patents, and Pharmaceutical Regulation
Another article published in 2007, titled “Pharmaceutical Lemons: Innovation and Regulation in the Drug Industry”, was published in Vol. 14 of the Michigan Telecommunications and Technology Law Review. This article analyses the inter-dependency between patents and pharmaceutical regulation. Before a new drug can be marketed the US Food and Drug Administration must be satisfied that it is safe and effective. According to conventional wisdom, the cost and delay involved in this process diminish the incentives to invest in the development of new drugs. Accordingly, several reforms aimed at restoring such incentives have been implemented and others have been advocated. The article challenges the central argument in the debate on the topic, namely that drug regulation and drug innovation are necessarily at odds with each other. Although intuitively appealing, the argument that drug regulation negatively affects the incentives to innovate does not fully capture the role that regulation plays in this industry. The article shows that the regulatory framework is not solely a burden imposed on the industry but it also provides a valuable service to the industry. Specifically, drug regulation provides certification of drug quality. Such certification, which may not be easily achieved by private market-based mechanisms, prevents the market from becoming a market for “lemons”. Therefore, rather than decreasing the expected returns to innovation, this aspect of regulation contributes to the value of new drugs and may actually encourage innovation. This point has largely been absent from most cost-benefit analyses of drug regulation, yet without it any discussion of the merits of regulation is incomplete.
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The Linguistic and Trust Functions of Trademarks
Modern trademark scholarship and jurisprudence view trademark law as an institution aimed at improving the amount and quality of information available in the marketplace by reducing search costs. By providing a concise and unequivocal identifier of the particular source of particular goods, trademarks facilitate the exchange between buyers and sellers, and provide producers with an incentive to maintain their goods and services at defined and persistent qualities.
Working within this paradigm, “Beyond Search Costs: The Linguistic and Trust Functions of Trademarks”, published in BYU Law Review in 2010, highlights that reducing search costs and providing incentives to maintain quality are related yet distinct functions and shows that recognizing their distinct nature enriches our understanding of trademark law. The Article first develops a distinction between two functions of trademarks: a linguistic and a trust functions. Then, the Article demonstrates how the distinction provides a matrix for evaluating the normative strength of various trademark rules and doctrines. Under this matrix, rules that promote both functions would be considered normatively strong; rules that promote neither function would be normatively weak; and rules that promote one function but not the other would be normatively ambiguous, their strength depending on the results of a closer cost-benefit analysis.
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What Antitrust Law Can (and Cannot) Teach about the First Sale Doctrine
The first sale doctrine (or exhaustion) limits the exclusive rights that survive the initial authorized sale of an item protected by such rights. The first sale doctrine has always been under pressure by owners of intellectual property rights, and courts have never been able to precisely outline its contours, or fully articulate its rationale. Recently, and somewhat counter-intuitively, insights borrowed from modern antitrust law and economics are invoked to provide a seemingly robust theoretical foundation for undermining exhaustion rules or narrowing their scope, and thereby strengthen IP owners’ control over downstream distribution and use of the goods they produce.
This article shows why this trend is misguided and should be resisted. Not because the insights from modern antitrust are irrelevant, quite the contrary. Indeed, the insights from modern antitrust law and economics can help underpin some of the first sale doctrine’s missing theoretical foundations and help drawing its proper contours. However, as this article demonstrates, the insights from modern antitrust do not support the case against the first sale doctrine. When taken seriously, these insights ultimately support its continued vitality.
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