Volume 8 Issue 1

The 'public goods' characteristics possessed by intangible works of authorship and invention present the basic market failure problem usually relied on to justify intellectual property rights. What is ordinarily less emphasized is that such market failure is no more than half of the prerequisite for an economically desirable copyright or patent system: another requisite condition is that there be less costly market imperfections after intellectual property is instituted than there would have been in the absence of the intellectual property regime. Intellectual property rights are best justified in the presence of "asymmetric market conditions", that is where (1) in the absence of intellectual property rights, there will be market failure; and (2) in the presence of intellectual property rights, there will be market success. The article compares areas of copyright law in which systemic rules have been used to minimize market imperfections and to further market formation with other areas of copyright in which doctrines such as the fair use doctrine and notions of reasonableness have been used to develop case by case solutions. In particular, the article examines whether face to face refusal to license can ever constitute the kind of market failure which would justify refusing to enforce an intellectual property right. The latter problem arises when copyright owners try to suppress hostile or unorthodox adaptations of their work. The device of "asymmetric market conditions" is also used to examine the presumption within restitution law that people who refrain from crossing others' tangible boundaries are free to take advantage of each other's labor. The article then uses the same conceptual tools to explain why intellectual property law reverses this presumptive freedom and replaces it with a duty not to copy.

* Wendy J. Gordon, Professor of Law and Paul J. Liacos Scholar in Law, Boston University School of Law, 765 Commonwealty Ave, Boston, MA 02215 USA. She can be reached by internet at wgordon@bu.edu.

An earlier version of this paper was published in Germany as Systemische und fallbezogene Lösungsansätze für Marktversagen bei Immaterialgütern (translated into German by Elizabeth Haberfellner) in Ökonomische Analyse der rechtlichen Organisation von Innovationen, Beiträge zum IV. Travemünder Symposium zur ökonomischen Analyse des Rechts, J.C.B. Mohr (Paul Siebeck) Tübingen, 328-67 (Claus Ott & Hans-Bernd Schafter eds., 1994).

The author wishes to note that along with new material, this article contains certain focal points and short extracts from some of the articles she has previously published. She suggests you refer to those other articles for fuller thematic and doctrinal development.

The author is grateful for suggestions to Ron Cass, Alan Feld, Elly Leary, Richard Markovitz, Hans-Bernd Schäfer, and participants at the Travemunde Fourth Biannual Law & Economics Conference, the Boston University faculty workshop, and the Olin Law & Economics Workshop and the University of Toronto. She also appreciates the research assistance provided by Sophy Chen and Douglas De May.

Above all she is grateful to the late Sam Postbrief.