The disintegration of intellectual property? A classical liberal response to a premature obituary.

• Author: Epstein, Richard A.
• Position: Response to Thomas C. Grey, Yearbook of the American Society for Political and Legal Philosophy, vol. 69; Margaret Jane Radin, Columbia Law Review, vol. 88, p.1667; and Peter S. Menell, Ecology Law Quarterly, vol. 34, p. 713

INTRODUCTION I. THE COHERENCE OF TANGIBLE PROPERTY A. Grey's Disintegration B. Radin's Conceptual Severance II. INTELLECTUAL PROPERTY A. The Carryover Hypothesis B. Exclusion C. Rights of Alienation 1. Licensing 2. Licensee estoppel 3. First sale 4. Rights of action D. Takings Questions CONCLUSION INTRODUCTION

The proper treatment of intellectual property, writ large, is the focal point of a high-stakes dispute that resonates both within and beyond legal circles. Roughly speaking, the protagonists over intellectual property fall into two broad camps. On the one side, there are those, like myself, who think intellectual property forms a coherent subset of a larger body of property law. Starting from this orientation, we constantly urge that the understandings of property law that have developed in connection with the traditional forms of tangible property can be carried over to intangible property even after the rise of modern technologies, such as the radio and the Internet. On the other side of the debate lie those who think that the rules of tangible property often provide little guidance for a sound system of intellectual property rights and should therefore be followed only with caution, if at all. The first side thinks that the law that is now in place can be improved by a sound adherence to first principles. Its detractors regard the system as moribund. The thesis of this Article is that it is too soon to write an obituary for an integrated system of tangible and intellectual property.

The dispute over the proper role of tangible property goes back to ancient times. The present disputes over intellectual property reflect its late arrival on the legal scene. But it would be a mistake to assume that this temporal gap prevents the unification of the two systems, each of which arose in a timely fashion when needed. The Romans, for example, developed an immensely sophisticated system of property to deal with land and chattels, and to a lesser extent water. (1) But the conditions of technology were such that Rome never developed any law of copyright. People had to pay small fortunes to get others to copy their manuscripts. Who needs protection against unauthorized copying, which is a boon to the original author? But as the costs of copying go down, the prospect of dissemination at a profit becomes real, and legal systems start to develop forms of copyright protection that echo, even if they do not precisely imitate, the constellation of property rights over tangible objects.

Similar arguments are applicable to patents. In ancient times, there was no organized system for the accumulation and organization of knowledge. There were no techniques for standardization or instrumentation. In this primitive state of technology, patents were of little value. But once measurements are standardized, and manufacture is possible on a mass production basis, the legal protection of inventions becomes a plausible social objective, which is far easier to implement if it can borrow freely from the preexisting systems of property rights for tangible assets. It is therefore no accident that the first systems of patent law emerged, but only on a localized basis, in Venice in 1474 in terms that anticipate the modern statutes in the field, (2) and consistently expanded thereafter. (3) Copyright has an even later start, dating from the mid-1550s. (4)

Historically speaking, the evolution of both patents and copyrights did proceed by analogy to physical objects, notwithstanding the one huge difference that no form of intellectual property can be reduced to possession. That point is surely important given that the possession of a tangible thing makes it relatively easy for the individual owner (who is usually, but not always, in possession) to use self-help to defend what he owns. Yet a regime that relies solely on self-help to protect tangible property is subject to obvious forms of abuse, so that it must be backed by a neutral system of state force to make it work. Indeed, much of the early development of land law both in Roman and common law systems revolved about the ability of individuals to resort to the legal system to recover land, chattels, or animals that had been taken from them by force. (5) The use of physical possession is not, of course, possible with intellectual property, which leads many modern writers to regard it as sui generis. They stress the limited value of analogies to the older bodies of law, given that information has two attributes that are not present with physical property: "non-rivalrous competition" and "non-excludability." (6) This claim of separation is overstated. There is, of course, no question that these last two elements must be taken into account in fashioning a complete account of intellectual property. But the inability of an owner to take physical possession of what he owns does not make it impossible for one person to have rights of exclusive use and disposition of the property in question. It only means that a legal system has to become more mature before it can handle the greater administrative burdens. In my view, the general heritage of tangible property cannot be disregarded because of the evident differences in the two systems of property rights.

As I hope to show here, I believe that huge returns lie from systematizing intellectual property by analogy and extension to successful legal regimes elsewhere. By following rules of proven worth in other areas, each new articulation of property rights need not be a voyage into the unknown. Instead, it can avoid the pitfalls for new forms of property rights by incorporating the salient features of established regimes. That incorporation cannot be slavish, however, because the information that lies at the core of intellectual property exhibits characteristics that are not shared by physical assets. A physical asset can be retained or given away, in whole or in part. But information can be both retained and given away at the same time. Any agreement, for example, whereby a trade secret is shared pursuant to a confidentiality agreement involves the simultaneous transmission and retention of information--but only if the contractual arrangements are given strong protection, as they typically are. (7) Similarly, the publication of information about a new invention or the creation of a literary work presents the same advantages. The owner of the work can realize gain from its publication to the world without forfeiting legal protection for the invention.

In all these regimes, exclusion takes on a different coloration than it does with real property, but it still seeks to maximize the gains from both the creation and dissemination of protected information. Figuring out how to trade off exclusive ownership that gives strong incentives for commercialization against the free but uncoordinated use of information left in the public domain offers the single greatest challenge to preserving the health of the law of copyrights and patents. (8) As I shall argue, the single adoption of one adjustment, and one adjustment only, goes a very long way to ease the transformation from tangible to intangible property. Just use limited terms of exclusive rights, longer for copyrights than patents, to work the transformation from tangible property to these two vital forms of intellectual property. At that point, the remainder of the rules that deal with tangible property, namely those that concern exclusion, use, and disposition, can be carried over without difficulty. The same can be said about the limitations that are imposed on a system of real property, including those that deal with special privileges--think of the law of private and public necessity--that allow one person to use the property of another, and the antitrust limitations that restrict the ability of any holder of tangible property to coordinate its actions with others or to engage in unilateral practices that monopolize a given market. (9)

I have little doubt that this model captures much of the historical evolution of property rights, in both writings and inventions, as a conscious extension of the classical liberal conception of property that is associated with such writers as John Locke, (10) William Blackstone, (11) and Adam Smith. (12) Just for the record, it is important to quote the single (though misleading) sentence of Blackstone that is commonly thought to capture this world view. Property refers to "that sole and despotic dominion which one man claims and exercises over the external things of the world, in total exclusion of the right of any other individual in the universe." (13)

Few people actually read this excerpt in its immediate textual context, which shows that Blackstone was well aware of the functional justifications for property rights, even within his natural rights framework. (14) This additional material explains that the defense of ownership cannot depend on receiving it from a prior purchaser, because that only pushes the ultimate inquiry back one step. How does the initial purchaser acquire the property in question? If by purchase, then the mystery is put back yet one more step. If not, then the alternative justification for private property has to be articulated and explained.

On this critical question, Blackstone was no natural law fetishist, as he immediately turns to examine the two rival theories of the acquisition of original ownership. (15) The first of these, which dates back to Roman times, (16) is the theory of occupancy whereby the first possessor of property becomes its owner, without the consent of any other person, given the relationship between the person and the thing. The second theory finds that the universal (if implied) consent of all other individuals justifies the institution in libertarian terms. Both of these theories have their weaknesses. The former does not explain why other individuals are so bound by the unilateral action of the first...