Academic journal article Journal of Economic Issues

Intellectual Property and Eminent Domain: If Ever the Twain Shall Meet

Academic journal article Journal of Economic Issues

Intellectual Property and Eminent Domain: If Ever the Twain Shall Meet

Article excerpt

One source of the limited practical utility of economic analysis in the reshaping of intellectual property institutions has been the unfortunate tendency on the part of too many economists to slip into modes of analysis that are essentially a historical, in seeking both to rationalize and to critique IPR provisions from the standpoint of social welfare theory and optimal mechanism design.

Paul A. David

Regardless of ideological persuasion, most economists will agree that technological innovation is a social process capable of generating widespread private and social benefits. How societies might organize to promote innovation is a more factious topic. One method often used to promote innovation is the granting of property rights over ideas and innovations. Once granted and enforced, intellectual property rights allow innovators to reap economic benefits from their innovations, benefits that might otherwise be freely appropriated by others through imitation. The design of intellectual property rights regimes is a difficult process marked by a problem Keith E. Maskus (2000) referred to as "dancing the dual distortion." For society to benefit from innovations, they must be widely available for use at low cost. At the same time, to create incentives for innovation, innovators are granted the right to limit the availability and consequently increase the costs of adopting their innovations. As with other monopoli stic situations, the intellectual property owner's pursuit of private benefits may demand that the innovation be employed at less than socially desirable levels.

Like most property rights, intellectual property rights can be bought, sold, or, generally, held for private use or gain. One must say "generally" because, in some cases, when a society's desire to acquire someone's private property surpasses the owner's willingness to sell, private property is forcibly converted to public use. In the United States this is done through governmental takings-eminent domain or inverse condemnation proceedings (both discussed below). In either case, the government is constitutionally required to pay the owner just compensation. To date, most property taken has been real property--land and buildings claimed for freeways, urban renewal, and so on. However, the increasing prevalence and importance of intellectual property in modern social life hints that takings procedures may be one day aimed at intellectual property. This possibility leads to the purpose of this paper: to ask what the probable consequences of systematic takings of intellectual property through eminent domain proce edings might be.

This paper explores several questions that are largely hypothetical. The overarching question is, what would happen if governmental bodies decided to use, or threaten to use, their power of eminent domain to claim intellectual property? This leads to several related questions. Why might governments be interested in acquiring intellectual property by this means? Is condemnation a legal, feasible, and appropriate way to bring intellectual property into the public domain, and are there any precedents for doing so? What special problems might arise if an overt policy of using eminent domain proceedings against intellectual property is undertaken? Each of these questions will be addressed in turn. First, a brief discussion of both eminent domain and intellectual property is in order.


Governmental taking of private property and the granting of intellectual property rights are institutions with long histories, In the United States, the parameters for both activities are set out in the Constitution, and both are widely practiced. Historically, most governmental takings have been takings of real property, land, and structures. The takings have occurred in cases where the public interest overwhelmed the standard justifications for protecting private property rights. Evolving economic structures and changing technologies have caused intellectual property to grow in importance. …

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