The regulatory turn in IP.

• Author: Lemley, Mark A.
• Position: Intellectual property - Thirty-First Annual Federalist Society National Student Symposium: Bureaucracy Unbound: Can Limited Government and the Administrative State Co-Exist?

History shows technologies flourish where market entry is free. (1) If people are free to come up with a new idea, completely different than anything done before, and launch it into the marketplace, society benefits, people make a lot of money, and we change the world.

So we don't want a "Mother, may I?" regulatory regime for innovation. A regulatory regime that requires permission to enter the market or develop a new product is a problem for innovation because it relies on the government, not the innovator, to decide the course of innovation.

Nor should we give a private company or individual "Mother, may I?" control over market entry. We are right to worry about government restrictions on entry. But we should also worry about incumbents, who can and will have an incentive to impose similar restrictions. It is important to remember, because it is quite often lost in the rhetoric surrounding these debates, that it is not the case that individual private decisionmaking is necessarily efficient. It is the case, however, that market decisionmaking is generally efficient. (2) But market decisionmaking is efficient largely because when stupid, greedy, or shortsighted people in the private sector make poor decisions, they are overthrown by people who make correct decisions. For private decisionmaking to produce efficient decisions, there must be a competitive market. In a "Mother, may I?" regulatory regime, whether government-imposed or incumbent-imposed, that competitive market will not exist and private decision making will not be efficient. Instead, a single private company (or the government) would make decisions for all participants. Unconstrained by market forces, such a private company is no more likely to perform well than government regulators.

Is intellectual property (IP) a "Mother, may I?" regime? The answer is complex. One way to view IP--the way Richard Epstein does--is to say: IP is a property regime; it is something around which parties can freely contract. (3) To libertarians, property regimes are good, so if IP rights are property regimes, more IP is better. But another way to view IP rights is to say, "this is a government restriction on what people can do with their own physical property and their own ideas." To libertarians, government restrictions on what people can do in a marketplace are bad, and so libertarians ought to think IP rights are bad. (4) The problem is that IP is both. It is at once a basis around which we can contract and allow the spread of new ideas and a government regulatory intervention in the marketplace that is designed to restrict what people can do with their own ideas and their own property.

If the idea of IP has this dual character, so too does IP law. In both copyright and patent in the last few years, maybe in the last few decades, we have seen a turn increasingly towards the regulatory side of IP and away from freedom of contract. The IP statutes contain some evidence of this change. The Copyright Act is almost ten times longer today than it was before it was amended in 1976.5 Large swathes of the Copyright Act really are regulation: regulating price, setting compulsory licenses, determining what can be done, etc. (6) The Patent Act is also moving in the same direction. Historically, most of the main provisions of the Patent Act were common law oriented. (7) As Richard Epstein has suggested, the new patent statute is definitely a step towards a regulatory rather than a common law regime. (8)

This regulatory turn in IP is not only evident in the statutory frameworks but also in the application of the law. In copyright law, after about fifteen years in which the government more or less left the Internet alone, copyright owners are making greater efforts to get the government to regulate what...