Risk Aversion and Rights Accretion in Intellectual Property Law

By Gibson, James | The Yale Law Journal, March 2007 | Go to article overview

Risk Aversion and Rights Accretion in Intellectual Property Law


Gibson, James, The Yale Law Journal


ARTICLE CONTENTS

INTRODUCTION

I.   COPYRIGHT'S FEEDBACK LOOP
     A. Doctrinal Indeterminacy and the Risk-Averse Actor
     B. Market Circularity
     C. Copyright's Doctrinal Feedback
        1. How It Works
        2. Positive Law and Strategic Behavior
        3. Affected Markets

II.  TRADEMARK'S FEEDBACK LOOP
     A. Trademark Doctrine
     B. Licensing Motivations
     C. Persuasion Knowledge
        1. Film and Television
        2. Merchandising
     D. Limitations on Trademark's Feedback

III. PATENT'S SHORT CIRCUIT

IV.  NORMATIVE IMPLICATIONS
     A. Do We Care?
     B. Reducing Uncertainty
        1. Statutory Standards and Regulatory Rules
        2. Increased Adjudication
     C. Reducing Consequences
     D. Doctrinal Refinements

CONCLUSION

Agree, for the Law is costly.

--William Camden, 1605 (1)

INTRODUCTION

Intellectual property law is a growth industry. It covers an expanding variety of subject matters, its protection lasts longer than ever, and its entitlements increasingly intrude into realms of conduct once reserved for public use. The blame (or, more rarely, the credit) for this incessant growth usually falls on the agents of positive law--courts and legislatures--and the rent-seeking rights-holders who influence them.

But when it comes to one aspect of this expansion--the increasing breadth of intellectual property rights--much of the responsibility lies not with positive law's usual suspects, but with an organic, inadvertent process that results from the interaction of indeterminate doctrine and risk-averse licensing. Copyright law provides the best example. The copyright doctrines that determine where private entitlement ends and public privilege begins are inherently ambiguous. This means that those who want to make use of copyrighted material cannot make accurate ex ante judgments regarding the need to secure a license from the rights-holder. Yet making the wrong call can be costly because the penalties for infringement typically include supracompensatory damages and injunctive relief. Combine these doctrinal gray areas and severe consequences with the risk aversion that pervades key copyright industries, and the result is a practice of securing copyright licenses even when none is needed. Better safe than sued.

In and of itself this state of affairs is unobjectionable, even laudable, in that the market provides certainty when the law does not. But licensing markets are not only the end result of legal doctrine; they are also instrumental in determining the reach of copyright entitlements. If a rights-holder can show that it routinely issues licenses for a given use, then copyright law views that use as properly falling within the rights-holder's control. Thus, the practice of licensing within gray areas eventually makes those areas less gray, as the licensing itself becomes the proof that the entitlement covers the use. Over time, public privilege recedes, and the reach of copyright expands; this moves the ubiquitous gray areas farther into what used to be virgin territory, which in turn creates more licensing markets, which in turn pushes the gray areas even farther afield, and so on. Lather, rinse, repeat.

This phenomenon, which I call "doctrinal feedback," is unappreciated in the intellectual property literature and unrecognized in the courts. Scholars and judges focus instead on top-down developments in the positive law--federal statutes, Supreme Court opinions, and so forth--never imagining that major transformations in the law could emerge from the bottom up, through practitioners' everyday application of longstanding, uncontroversial principles. For example, everyone agrees that certain copyright doctrines are ambiguous, and this ambiguity can be advantageous because it allows courts to reach equitable results despite substantial variation and complexity in the fact patterns they encounter.

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