Innovation for the 21st Century: Harnessing the Power of Intellectual Property and Antitrust Law.

• Author: Lastowka, Greg
• Position: Book review

INNOVATION FOR THE 21ST CENTURY: HARNESSING THE POWER OF INTELLECTUAL PROPERTY AND ANTITRUST LAW. By Michael A. Carrier. New York: Oxford University Press. 2009. Pp. viii, 412. $65.

INTRODUCTION

For over a decade, Michael Carrier (1) has been exploring the intersection of antitrust and intellectual property ("IP") law, contributing many articles that offer new solutions and approaches to the vexing problems confronting the law of innovation. (2) Carrier's academic writing is situated in a voluminous scholarly discourse about the appropriate rules and goals of the laws of copyright, patent, and antitrust.

While Carrier easily could have written an "insider" tome for specialists in this area, his new book, Innovation for the 21st Century, is targeted at a broader audience. Carrier's book is directed at legislators, jurists, and opinion makers--as well as interested readers--who want to understand these questions and may play some part in legal reforms. It follows, given his broad audience, that Carrier faces some challenges describing the specialized fields of copyright, patent, and antitrust law.

To overcome this hurdle, Carrier writes two books in one. Carrier spends the first hundred pages of his book providing the general reader with a basic primer on the laws of copyright, patent, and antitrust (Chapters One to Five). This primer is reason enough to recommend Carrier's book. With clarity and verve, it leads the novice quickly and effectively through the key doctrines and cases. Carrier notes important scholarly voices, but does not get bogged down in excessive complexities.

The primer, however, is just a stepping stone on the way to Carrier's real agenda, which is convincing the reader that the existing law he describes must be reformed to better promote innovation. To put it mildly, Carrier is enthusiastic about the social benefits attending technological innovation. He argues, congruently, that innovation should be the pole star guiding both IP and antitrust policy (p. 33).

Carrier spends the majority of his book applying his innovation-centered framework to existing law (Chapters Six to Thirteen). He does this by offering ten specific proposals for reforms of copyright, patent, and antitrust law. Even those who are skeptical of Carrier's proposals must admire his ambition here: he moves from his guiding theory to a general legal primer to ten contextual applications, all in the span of less than four hundred pages.

Legal specialists will no doubt find the velocity of the book somewhat alarming and perhaps ill-advised. Tackling the future of patent, antitrust, and copyright in separate books might seem like a more prudent and conservative methodology. Yet Carrier is concerned primarily about intersections and overarching goals. He therefore makes the strategic decision to summarize a broad field and cut to the chase about a range of problems and solutions. Amazingly, he manages to pull it off. Without taking shortcuts, Carrier makes a soup-to-nuts argument for legal reforms in three diverse fields in a way that is accessible to the general reader.

In the next few pages, I will briefly explore Carrier's threshold problem, the tension between the law of IP and antitrust. Carrier offers to solve this tension by refocusing the law on innovation policy, letting innovation steer the agenda for resolving any conflicts at the IP-antitrust border.

Following this discussion, I will turn to Carrier's proposals for copyright law reform. After describing these reform proposals, I conclude with my reaction: while I support Carrier's proposed reforms wholeheartedly, I worry that they do not go far enough. Copyright law, I argue, is in need of much more radical reforms in order to resolve its contemporary conflicts with innovative technologies.

1. INTELLECTUAL PROPERTY & MARKET COMPETITION

A large part of Carrier's book is about the tension between antitrust and intellectual property. The history of the legal intersection is explored in some detail in his primer (Chapter Four). Carrier's solution to the tension is to let innovation harmonize IP and antitrust law. (3) Yet the tension that Carrier seeks to overcome is itself a subject of some dispute. So first, I should briefly summarize how Carrier understands that tension.

Antitrust law is generally wary of granting individuals and firms exclusive rights to sell particular commodities in the marketplace. Courts will frequently prefer market competition to monopoly power (accompanied by the monopolist's predatory activity), given that vibrant competition among firms lowers consumer prices and rewards more efficient producers of goods and services (pp. 56-61).

Intellectual property law, on the other hand, creates what seem to be monopolies. Patent and copyright owners enjoy the exclusive right to commercialize their inventions and creative works (Chapter Two). Intellectual property rights necessarily entail the legal suppression of market competition in favor of these exclusive rights (pp. 37-43, 72). While the substitution of replacement inventions and works might serve to reduce or even negate the market power represented by a copyright or patent, the law does seem designed in a way that prevents a form of market competition for the protected work or invention itself. So, we might ask, is intellectual property generally problematic from an antitrust perspective?

The answer to that question has varied over time, as Carrier explains (Chapter Four). As a matter of theory, it should first be noted that IP laws are not designed for the purpose of granting commercial monopolies, even if a sort of monopoly is obtained through copyright and patent entitlements. Instead, these rights are provided, in theory, to benefit society, albeit indirectly. As the Constitution tersely explains (and IP rights holders sometimes forget), copyrights and patents are intended to "promote the Progress of Science and useful Arts." (4)

Patents and copyrights are, from the standard legal theoretical perspective, a sort of bargain between society and those who create new things: they establish commercial incentives designed to entice more individuals to invest more resources in creativity and technological innovation. (5) The right to monopolize, commercially, one's own works and inventions presumably leads more authors and inventors to pursue copyrights and patents. Society benefits from this race for property rights, the theory goes, because in the absence of IP rights, fewer individuals would engage in this sort of labor. Society would be left with less creativity and less innovation.

Of course, while the theory provides that IP contributes to innovation and creativity, everyone knows that IP rights are not absolutely necessary to produce art and inventions. A glance at the history books tells us this. Ancient civilizations produced quite a few original artworks and clever inventions. IP rights clearly had no part in all of this ancient creativity and invention. This is because patent and copyright are legal newcomers, only a few centuries old. The theory must be, therefore, that IP rights encourage greater, more socially optimal production of inventions and artistic works. The law seems to be designed on the premise that some additional incentive is needed, but the question is really how much of an IP right produces the optimal social benefits. IP law, courts often say, strikes a "delicate balance" between limited exclusive rights and the default condition of free market competition.

Perhaps the clearest restriction on IP protection is the limited duration of copyrights and patents. According to the Constitution, these are granted "for limited Times." (6) Given that neither people nor commercial firms live forever, perpetual and exclusive property rights in inventions and creative works are not required to optimally encourage individual and collective creativity and invention. Because copyrights and patents are limited in duration, it follows that all works and inventions must eventually be fully returned to the commons of the competitive marketplace.

The "delicate balance," however, is struck not only with regard to the duration of IP fights, but also with regard to the power and scope of those fights. Strong or weak legal protections might be applied to existing IP rights and the market strength of existing IP rights must also be balanced against the background presumption of vigorous market competition.

In explaining the history of this balancing act, Carrier briefly describes the story of Motion Picture Patents Co. v. Universal Film Manufacturing Co., a 1917 Supreme Court decision. (7) The plaintiff dominated the U.S. film industry and also held a patent in its film projector technology. As a condition of the patent, it required those who used its projectors to display only its own films. The defendant had used the projector with independent films, but argued that this was not an infringement of the patent because the patent concerned only the film projector, not the films shown on it.

When the case arrived at the Supreme Court, antitrust instincts won out over the power of IP fights. The Supreme Court found the plaintiff's restriction was invalid "because such a film is obviously not any part of the invention of the patent in suit." (8) To enforce the patent right against the defendant "would be to create a monopoly in the manufacture and use of moving picture films wholly outside of the patent in suit." (9) Justice Holmes, joined by Justices McKenna and Van Devanter, dissented. Summarizing his argument, Holmes stated that, because a patent owner "may keep his device wholly out of use.... I cannot understand why he may not keep it out of use unless the licensee, or, for the matter of that, the buyer, will use some unpatented thing in connection with it." (10) Holmes's argument was actually consistent with the late-nineteeth- and early-twentieth-century consensus on this...