The Heritage Foundation

Legal Memorandum #179 on Legal Issues

June 21, 2016

June 21, 2016 | Legal Memorandum on Legal Issues

The Constitutionalist and Utilitarian Justifications for Strong U.S. Patent and Copyright Systems

The popular notion that U.S. intellectual property rights, especially patents and copyrights, are special privileges that merit less protection than more traditional property rights, both on constitutionalist grounds and on pragmatic economic policy grounds, is deeply flawed. The robust protection of patents and copyrights as property is consistent with the original understanding of the Framers of the Constitution, who viewed IP through the lens of natural rights. Also, far from being inefficient monopolistic drags on economic efficiency as some critics have suggested, the patent and copyright systems are vital to innovation, wealth creation, and economic growth. Calls to degrade IP rights are misplaced and, if heeded, would prove detrimental to the American economy. Congress and the executive branch should enhance the protection of American IP rights both in the United States and around the world.

Key Points

  1. The Patent and Copyright (IP) Clause’s recognition of the exclusive rights of authors and inventors in the fundamental law of the land conveys the importance of these rights.
  2. Some suggested improvements in the patent system are not without merit, but a one-sided, negative view of patents has come to dominate U.S. public policy to such an extent that the economic benefits of the system and the rights of patentees have been largely obscured.
  3. A significant body of empirical research by independent scholars supports a strong association between patents and faster economic growth and innovation.
  4. Far more serious than copyright expansionism is the proliferation of copyright piracy: the unauthorized reproductions of copyrighted works that has continued to grow in severity despite the existence of statutory civil and criminal penalties for copyright infringement.
  5. Given the grave problem of global copyright theft, this is precisely the wrong time to weaken U.S. copyright protection.

Intellectual property (IP) is increasingly important to the American private economy, and a discussion of the appropriate public policy toward IP is timely, particularly given the recent growth in public skepticism toward IP rights.[1] Robust federal protection for IP is not just important to America’s economic future, but also consistent with constitutional originalism and the early U.S. historical understanding of the nature and role of IP.

Critical scrutiny has focused on the federal patent and copyright systems, which are authorized by the Patent and Copyright Clause (IP Clause) of the U.S. Constitution.[2] The following discussion of IP also focuses on patents and copyrights. The other two principal forms of intellectual property, trademarks and trade secrets, are the subject of federal legislation pursuant to the Commerce Clause of the U.S. Constitution,[3] as well as protections in state law. These forms have received less critical attention lately and are beyond the scope of this commentary.

Contrary to what some critics have argued, the robust protection of patents and copyrights as property is consistent with the original understanding of the Framers of the Constitution, who viewed IP through the lens of natural rights. During the early stages of the Republic, leading commentators and legislators, as well as President Abraham Lincoln, held IP rights in high regard. Supporters of robust IP rights can therefore claim the force of history and constitutional political philosophy, while critics fail in their claims that IP rights are special privileges that should be deemed second-class property rights (if they qualify as rights at all).

Admittedly, the fact that IP rights have solid constitutional backing does not address the question of how Congress should deal with them today. One might ask whether Congress, consistent with its authority under the IP Clause, should cut back on IP rights for pragmatic reasons, such as strengthening the American economy. Far from being inefficient, monopolistic drags on economic efficiency as some critics have suggested, however, the patent and copyright systems are vital to innovation, wealth creation, and economic growth.

Thus, calls to degrade IP rights are misplaced and, if heeded, would prove detrimental to the American economy. Congress and the executive branch should enhance rather than lessen the protection of American IP rights both in the United States and around the world.

Recognition of IP Rights in the Constitution and the Early American Republic

The IP Clause of the U.S. Constitution empowers Congress “[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries….” There is little direct evidence bearing on the Clause’s original meaning: It was not a major structural innovation that sparked debate at the Constitutional Convention, and it did not have great historical significance (unlike, for example, habeas corpus).[4]

One can nevertheless glean important insights into how the Framers of the Constitution viewed patents and copyrights by reviewing their writings on property and the political philosophy that animated the Founding Generation.[5] Such an examination reveals that “the claims of individuals” to their IP were not deemed by the Framers to be a special privilege conveyed by government; rather, they were considered fundamental natural property rights, akin to better-known rights in tangible property.

The Framers’ thinking was informed by John Locke’s understanding of natural rights as expressed in his Second Treatise of Government.[6] In particular, Locke’s essay “Of Property,” the fifth chapter of the Second Treatise, offers a justification for the acquisition and enjoyment of private property.[7] Locke viewed property as a broad referral to the exclusive rights that individuals hold in their own selves and their own labor.[8] He saw government as existing to protect the property persons claim by individual right of acquisition through their labor, which is the source of the value that is created.[9] Although Locke did not specifically reference IP, by its own terms, his conception of property is not limited to tangible property.[10]

James Madison’s acceptance of Lockean concepts of property is revealed in his 1792 National Gazette essay “On Property.” In that essay, he states that property “[i]n its larger and juster meaning embraces everything to which a man may attach a value and have a right” and “which leaves to everyone else the like advantage.”[11] IP, as well as physical property, possesses this grounding in natural right: The concept of rights in an author’s writings and an inventor’s discoveries is implicitly encompassed within this broad understanding of property. Admittedly, however, this essay does little to explore the implications of the distinctions that exist among various types of property.

In a recent book, Randolph May and Seth Cooper provide a clear summary explication of the Framers’ understanding that IP rights are a legitimate form of property that is entitled to protection by government much as traditional forms of tangible property are protected.[12] The fact that a special constitutional provision, the IP Clause, generally defines the ambits of protected IP does not detract from that conclusion. As the authors explain:

Madison and the Founding Fathers held a two-track understanding of property. They also understood property “in its particular application.” This narrower definition separated “personal” rights—including public communication of opinions, liberty of conscience, and free use of one’s faculties—from “property” rights in actual possessions, such as “a man’s land, or merchandise, or money.”[13]

This “particular application” or narrower understanding of property was likewise rooted in natural right, but it also depended on civil society: Laws established by governments expanded the scope of protected property and reflected social and technological progress. Intellectual property and physical property both share this necessary connection to the laws of society, and both copyrights and patents fit within the meaning of property in this narrower sense of the term.

Stated somewhat differently, in the broad understanding of property held by Madison and the Founding Fathers, a person has a natural right to the fruits of his or her labor. The right to use one’s faculties to acquire property is a personal right, and the right to the actual productions of one’s labor is a property right in the narrow understanding of the term.

That individuals, by nature, possess a property right to the fruits of their own labor does not necessarily mean that individuals, by nature, in all cases possess enforceable copyrights or patent rights. Certainly, coherent and functional copyright and patent systems seem to presuppose a vibrant civil society under a duly constituted governing authority that must establish and enforce intellectual property systems, but civil law does not sever the connection between property rights and natural rights. Rather, as Sir William Blackstone observed in his Commentaries on the Laws of England, the purpose of civil law is to fulfill natural rights of property by expanding property, creating new forms of property as society progresses, and ensuring mutual enjoyment of property rights by all persons.[14]

Civil laws apply in unique ways to different types of property. The need for different rules regarding different kinds of intangible property is akin to the need for different rules for different kinds of tangible property, whether real property, minerals, water, or personal property, but this in no way suggests that in a foundational sense, intangible property rights are any less grounded in natural right or in our constitutional order than tangible property rights are.

Consistent with this observation, May and Cooper view the Constitution’s explicit singling out of IP rights as emphasizing their importance, not denigrating them in comparison with other property rights:

Article I, Section 8, Clause 8 of the U.S. Constitution delegates to the federal government a responsibility for securing the exclusive rights of authors and inventors for limited times. Fixing terms for copyrights or patents, defining fair use of copyrighted works, and setting appropriate enforcement penalties necessarily involve policy judgments for Congress. The IP Clause’s recognition of the exclusive rights of authors and inventors in the fundamental law of the land conveys the importance and respect with which these rights should be regarded.[15]

In sum, both traditional forms of property and categories of property “in its particular application,” such as IP rights, qualify as natural rights. The fact that IP rights are defined through a specific constitutional provision and positive statutory law does not make them any less worthy of protection than more traditional forms of tangible property are. All forms of property, tangible as well as intangible, are subject to rules that define their contours.

Madison’s very brief discussion of the IP Clause in Federalist No. 43 comports with a natural rights understanding of IP rights. In referring to Congress’s statutory authority to protect IP, Madison opined:

The utility of this power will scarcely be questioned. The copyright of authors has been solemnly adjudged, in Great Britain, to be a right of common law. The right to useful inventions seems with equal reason to belong to the inventors. The public goodfully coincides in both cases with the claims of individuals.[16]

The accuracy of Madison’s apparent belief that copyright and patent rights were rooted in English common law is not key to this passage. Rather, what is of paramount importance is the statement that these rights “belong to” authors and inventors and must be seen as “claims of individuals.” This language identifies copyrights and patents as inherently natural rights—the fruits of one’s labor—not arbitrary special grants of favor by the state.

In short, IP is justified on natural rights grounds; references to the English legal tradition are mere window dressing. The fact that statutory grants of IP rights have unquestioned “utility” and promote “the public good” is not a denigration of these natural rights; to the contrary, it should be seen as an acknowledgment that these particular natural rights also have the added merit of advancing broad social goals.

In other words, Federalist No. 43 acknowledges that protection of IP rights by legislative action fits squarely within the classical liberal framework of government securing individual property rights under the rule of law. Consistent with that acknowledgment, the Founding generation wasted no time in ensuring that IP rights were given their due.[17] George Washington called on the First Congress to pass legislation securing IP rights,[18] and it did so, enacting the nation’s first Copyright and Patent Acts in 1790. Representative James Madison played a leadership role and Noah Webster was active behind the scenes in promoting copyright. This and other evidence of strong support for IP rights during the First Congress demonstrates that “the First Congress’s securing of copyrights and patents amidst all its other constitution-implementing business is indicative of IP’s consistency with the logic of American constitutionalism.”[19]

Some have claimed that one great Founder, Thomas Jefferson, was opposed to IP rights, but given the fact that Jefferson did not participate in drafting either the Constitution or The Federalist Papers, one should not accord too much weight to his views on IP.[20] Moreover, ambiguity surrounds Jefferson’s views on IP and on property in general. While Jefferson “believed a person has a natural right to the fruits of his…labors…he appears to have regarded property as a social institution fitted for social human beings”[21] and thus was out of step with the consensus views of his contemporaries on natural rights. According to one reading of Jefferson’s 1813 letter to Isaac McPherson, Jefferson suggests that even property rights in land require government monopoly protection, since “[s]table ownership is the gift of social [not natural] law, and is given late in the progress of society.”[22] Accordingly, it would be a huge mistake to rely on Jefferson’s views as representing the Founding-era understanding of property in general, let alone IP.

In any event, Jefferson as President oversaw a modest expansion of IP rights. For example, he appointed the first full-time superintendent to oversee patent applications and signed the Copyright Act of 1802, which extended copyright protection to maps, charts, engravings, etchings, and prints. In addition, Jefferson wrote in his 1807 letter to Oliver Evans that “[c]ertainly an inventor ought to be allowed a right to the benefit of his invention for a certain time,” and “[n]obody wishes more than I do that ingenuity should achieve a liberal encouragement”[23] These are hardly the statements of someone opposed to IP rights. Thomas Jefferson clearly cannot be cited as an example of Founding-era denigration of or distrust for IP rights.

Views about IP expressed by the courts during the early American Republic are in accord with the Founders’ high regard for IP as seen through the lens of natural rights. For example, Chief Justice John Marshall, writing for a federal district court in 1813 in Evans v. Jordan,[24] stated that an inventor possesses an “inchoate property [which] is vested by the discovery” and “perfected by the patent.” The Supreme Court of the United States used similar language in 1850 in Gayler v. Wilder.[25]

In general, the Antebellum period was a time of strong respect for IP rights rooted in the natural rights tradition.[26] Particularly noteworthy are statements by the two greatest legal treatise writers of the period, Chancellor James Kent and Justice Joseph Story, who viewed both patents and copyrights as property acquired by individuals through their labor.

Story, in his Familiar Exposition of the Constitution, wrote that it is “a poor reward, to secure to authors and inventors, for a limited period, only, an exclusive title to that, which is, in the noblest sense, their own property.”[27] With regard to the role of the IP Clause in promoting patents and copyrights, Story wrote that “it is impossible to doubt its justice, or its policy, so far as it aims at their protection and encouragement.”[28] Likewise, In his Commentaries on American Law, Kent praised the “justice and the policy of securing to ingenious and learned men the profit of their discoveries and intellectual labor.”[29]

Congress and Presidents, as well as the courts, strongly backed IP rights during the Antebellum era.

  • In 1831, encouraged by such statesmen as Daniel Webster and Henry Clay, Congress passed a significant expansion of copyright terms and enabled heirs to claim a right in renewal of those terms.
  • Other laws that generally strengthened copyright were enacted in 1819, 1834, 1846, 1855, 1856, 1859, and 1861.
  • The Patent Act of 1836 expanded terms of protection, established the U.S. Patent Office, and provided additional resources for processing patent applications.
  • Other statutes that generally enhanced patent rights were passed in 1832, 1837, 1839, 1842, 1848, 1849, 1851, and 1861.
  • Presidents who criticized monopolies, such as Andrew Jackson, Martin Van Buren, and James K. Polk, signed legislation expanding IP rights.

This Antebellum experience was evidence of “a common conceptual understanding about copyright and patent protection rooted in natural rights principles,” according to May and Cooper. “In this respect, Antebellum-era thinking marked the continuation of a consistent line of thought about the basic nature of intellectual property rights in the American constitutional order.”[30]

Abraham Lincoln and Ulysses S. Grant also evinced strong support for IP rights.[31] Articulating the Lockean view, Lincoln stated that “each individual is naturally entitled to do as he pleases with himself and the fruit of his labor.”[32] He outlined the case for IP protection in various versions of his 1858 Lecture on Discoveries and Inventions, praising patent laws that “added the fuel of interest to the fire of genius, in the discovery and production of new and useful things.”[33] President Grant signed the comprehensive Copyright and Patent Acts of 1870. In general, May and Cooper conclude that:

[E]xamination of intellectual property in light of antislavery thought, political action tied to the Civil War, and the Reconstruction Amendments, bolsters the logical case for protection of intellectual property rights and its connection to the underlying principles of the American constitutional order.[34]

In sum, ample evidence supports the proposition that IP rights, embodied in the Constitution’s IP Clause, were understood by the Framers of the Constitution as natural rights worthy of strong protection. That understanding subsequently was embodied and confirmed in opinions by the courts, commentaries by leading constitutional scholars, and legislative actions by the Congress and various Presidents during the early Republic and Antebellum periods. Finally, the natural rights case for IP was recognized by Abraham Lincoln, and IP rights continued to be highly respected during Reconstruction. Within the American constitutional tradition, patents and copyrights are highly respected natural property rights that merit robust governmental protection.

The Pragmatic Case for Robust IP Rights

Despite this history, it is up to Congress to decide how much current protection to provide IP rights pursuant to the IP Clause. The American patent and copyright law systems, bulwarks of American leadership in technological innovation and the creative arts, are under unprecedented attack.

  • Proposals for the reform of patent litigation procedures—proposals that some commentators have argued would weaken patent rights[35]—are before Congress only five years after enactment of comprehensive patent legislation, the America Invents Act of 2011;[36]
  • The Supreme Court has constrained the scope of patent protection in recent decisions;[37]
  • Some economists have decried the quality of patents that are issued, suggesting that additional devaluation of patents might be appropriate;[38]
  • Federal enforcement agencies have begun to use antitrust law in an attempt to limit returns to patents that cover key standardized technologies;[39] and
  • Various copyright critics have denigrated statutory copyright protection as a form of economically wasteful “special privilege” that should be curbed or even eliminated.[40]

An examination of the patent and copyright systems reveals that such critiques are both badly misplaced and counterproductive.

Patents. A U.S. patent is a statutorily defined property right granted by the U.S. Patent and Trademark Office for a term of 20 years from the date of application. It grants the holder “the right to exclude others from making, using, offering for sale, or selling” the invention in the United States or “importing” the invention into the United States. A patent must meet certain criteria, including “novelty” and “non-obviousness,” in order to be granted.

An uneasy relationship existed between the patent system and American public policy during the 20th century, oscillating between periods when patents were considered dubious “monopolies” that should be curbed through antitrust law and periods when patents were deemed keys to innovation that should not be undermined. The latter position, which prevailed within the U.S. government from the 1980s until very recently, was embodied in bipartisan IP-Antitrust Guidelines issued by the Department of Justice (DOJ) and the Federal Trade Commission (FTC).[41] Those guidelines, reflecting substantial economic input, emphasized that all forms of IP were to be treated like other types of property. In particular, the guidelines taught that patent licensing transactions were generally procompetitive and that patent holders should be allowed to obtain profits reflecting the full value of their property right.

These DOJ–FTC guidelines were part of a broad bipartisan American consensus that generally favored strong IP rights. This consensus was reflected most notably in the U.S.’s success in securing the 1994 adoption of strong IP protection in the World Trade Organization’s “TRIPS” Agreement.[42]

Over the past decade or so, however, naysayers have focused on the allegedly poor quality and uncertain nature of existing patents in the United States. In particular, work by Professors Carl Shapiro and Mark Lemley on “probabilistic patents” made a public policy case for weakening patent protection.[43] Concluding that rights granted to patent holders are “highly uncertain” (and nearly half of patents litigated to final judgment are invalidated) and represent only a legal right to exclude, Shapiro and Lemley argued for a fundamental rethinking of patent policy in four areas: the system for granting patents, the patent litigation system, the incentives of patent holders to use cross licenses or licenses to settle patent disputes rather than fully litigating them, and the antitrust assessment of agreements among rivals to settle actual or threatened patent litigation.

Shapiro and Lemley stressed that the scope and validity of patent rights (most of which are not litigated) are uncertain; that patents are merely contingent property rights; and that “weak” patents can command unjustified premiums. Implicit in this analysis was the premise that the current patent system unnecessarily restricts competition and imposes excessive costs on society. Therefore, they argued that antitrust, patent grant, and patent litigation policy should be reoriented to reduce patent grants (with a focus on higher “quality”) and subject patents to greater legal restrictions, including easier limitation and invalidation.

The “bad patents” policy argument has influenced public policy.

  • In 2003 and 2011, the FTC issued reports[44] calling for regulatory improvements aimed at raising patent quality and promoting patent-related litigation reforms.
  • Federal legislation enacted in 2011 made it easier to challenge patents in post-grant administrative proceedings and arguably was responsible for a diminution in the value of U.S. patents and a substantial reduction in GDP.[45]
  • Additionally, a series of Supreme Court decisions made it easier (among other things) to invalidate patents in court and harder for patentees to obtain injunctions,[46] further devaluing patents.
  • Federal antitrust enforcers began to focus on alleged abuses by firms whose patents are key to the implementation of standards[47] and brought more challenges against settlement agreements involving pharmaceutical patents.[48]
  • Legislative proposals directed at allegedly abusive patent assertions and costly lawsuits filed by patentees are being considered in Congress.[49]
  • The Obama Administration has appointed officials to senior policy positions whose views gibe with the “problematic patents” trope.[50]

To be sure, certain patents are defective, and there have been abusive patent assertions and patentee lawsuits. Administrative improvements in the Patent Office, initiatives to improve patent quality, and efforts to rein in excessive litigation costs, if properly implemented, are not without merit. Nevertheless, a very one-sided, negative view of patents and the patent system has come to dominate U.S. public policy to such an extent that the economic benefits of the system, not to mention the rights of patentees, have been largely obscured.

This negative view is a most regrettable development. No property rights system is perfect, and concerns about defective or uncertain rights affect real and personal property as well. Although these problems may be more serious with regard to patent rights, they should not be used to undermine a system that is of key importance to American economic vitality.

Furthermore, by raising the probability that patent applications will be denied and by injecting additional uncertainty into the evaluation of existing patents, these policy changes threaten to cause some socially beneficial patents (not just “bad” or “inappropriate” patents) not to be pursued. Some “strong” as well as “weak” or “poor” patents stand to be erroneously rejected or struck down due to inevitable error costs associated with patent application reviews and with judicial review of litigated patents.

But the paring back of patent rights spurred by a fashionable “bad patents” philosophy does more than threaten to have significant negative side effects: It flies in the face of a large and growing economic literature that highlights the economic benefits of patents. Many studies highlight the value of IP in general and patents in particular to the American economy. For example, a comprehensive 2012 U.S. Department of Commerce study concluded that virtually every industry relies on some form of IP; that IP-intensive industries accounted for over $5 trillion in value added in 2010 alone; that a sample of 26 patent-intensive industries accounted for 3.9 million jobs in 2010; that IP-intensive jobs paid significantly better than other jobs; and that IP-intensive industries contribute substantially to U.S. merchandise and services exports.[51]

Much additional empirical research by independent scholars supports a strong association between patents and faster economic growth and innovation.[52] In particular, a recently published peer-reviewed cross-sectional study covering many countries over two decades finds a strong association among patent rights, economic growth, and increased productivity.

Over the past decade, Organisation for Economic Co-operation and Development studies have found a positive association between the strengthening of IP rights (including patents) and important economic indicators as well as a positive relationship between the strengthening of patent rights and increased innovation. This positive relationship may reflect the fact that by offering a period of market exclusivity, strengthening patents raises incentives to invent in innovative fields characterized by high research and development outlays and delays in coming to market.

Although scholarly opinion is not unanimous and correlation does not necessarily imply causation, the weight of recent empirical findings by and large lends solid backing to strong patent protection. This empirical work is in accord with recent theoretical law and economics analyses that explain why the patent system functions as an engine of economic growth and innovation. For example:

  • Professor Clarisa Long has explained that patenting serves the key role of lowering information costs to firms, allowing firms to signal their research and development capabilities and human capital to capital markets and promoting beneficial licensing.
  • Professor Paul Heald has propounded a somewhat different theory, under which patent ownership rules establish a title registration system for certain information assets, thereby significantly lowering transaction costs compared to the available alternative systems of trade secrecy and contract law.
  • Professor Scott Kieff has argued that a patent system that affords strong protection for the right to exclude others yields greater efforts by innovators to exploit new technologies and is more effective at spurring the intensive use of new technologies, government grants, tax credits, or other regulatory vehicles to encourage innovation.
  • Kieff and James Daily have critiqued recent U.S. Supreme Court decisions narrowing the scope of patentable subject matter, arguing that these changes have undermined the goals of invention commercialization and competition.

In 2014, Professor Daniel Spulber produced a broad overview of three important ways in which patents support the market for inventions: “(1) by increasing transaction efficiencies and stimulating competition; (2) by allowing owners to control how inventions are turned into innovations and guiding incentives for invention and innovation; and (3) by promoting the financing of invention and innovation.”[53] These explanations go far beyond and are entirely separate from the traditional “reward theory” justification for patents, which viewed patent law as a vehicle that enables the inventor to capture rewards from an investment in an invention.

Three professors from Harvard Business School and New York University recently reported empirical research, based on extensive Patent Office data, supporting the proposition that patenting stimulates innovation and job growth by startup companies:

We examine[d] whether patents help startups grow and succeed using detailed micro data on all patent applications filed by startups at the U.S. Patent and Trademark Office (USPTO) since 2001 and approved or rejected before 2014…. We f[oun]d that patent approvals help startups create jobs, grow their sales, innovate, and reward their investors. Exogenous delays in the patent examination process significantly reduce firm growth, job creation, and innovation, even when a firm’s patent application is eventually approved. Our results suggest that patents act as a catalyst that sets startups on a growth path by facilitating their access to capital. Proposals for patent reform should consider these benefits of patents alongside their alleged costs.[54]

Noted patent law professor Jay Kesan has summarized the latest economic thinking on the benefits of the patent system in a recent article:

Patents offer substantial economic benefits after they are granted, not just before. Patents, much like vehicle titles, serve as definable, tangible assets that can be readily monetized and transferred, creating a market for inventions. As such, patents facilitate more efficient cooperation and collaboration between technology developers, commercializers, and adopters. Patents also serve an important signaling function. Once a patent claim is filed, the patent holder can more easily be identified by potential collaborators and complementary asset holders…. Finally, patents facilitate private ordering. Armed with a patent as a definable asset, patent holders are able to cooperate with other entities in…licensing arrangements with minimal risk of misappropriation. Such mechanisms allow technology developers to specialize and to create interoperable technology, which provides substantial benefits to consumers. Therefore, even if patents do not entirely motivate inventors to create, they remain vital to maintaining an innovative economy and ought to be considered as such by policymakers.[55]

Public officials, courts, and commentators who question the value of strong patents have failed to address this compelling research adequately. Unless they are able to do so, one can only conclude that their actions over time to degrade patent rights and reduce returns to patents—well-intentioned though they may be—will harm the American economy.

Copyrights. The U.S. Patent and Trademark Office provides the following definition of a copyrighted work:

A copyright protects works of authorship that have been tangibly expressed in a physical form. Think songs, books, movies, and works of art. The duration of copyright protection depends on several factors. For works created by an individual, protection lasts for the life of the author, plus 70 years. For works created anonymously, pseudonymously, and for hire, protection lasts 95 years from the date of publication or 120 years from the date of creation, whichever is shorter.[56]

Computer software is also protected by copyright. In order to enjoy a variety of protections under international agreements, copyrighted materials must be registered with the U.S. Copyright Office. The details of the scope of copyright law, its long and tortured legislative development, and litigation surrounding it are beyond the scope of this presentation.

Critics of copyright have argued that it involves special government grants of “privileges” that should not be deemed property and that it excessively limits third parties’ First Amendment rights of creative expression, thereby imposing major costs on the public.[57] In particular, critics argue that the allegedly excessive length of statutory copyright protection in the United States confers unwarranted excessive monopoly rents on fortunate copyright holders. While some critics argue for curtailing copyright length and imposing other limitations on copyright holders, such as broader “fair use” rights to reproduce portions of copyrighted works without permission, others claim that copyright should eventually be replaced with a non-statutory system of “common law” protection for contracts covering creative works.

The full-scale elimination of the U.S. copyright system appears, at least for the foreseeable future, to be unrealistic for various reasons, including:

  • The millions of U.S. jobs and hundreds of billions of dollars in annual contributions to U.S. GDP by copyright-intensive industries,[58]
  • The broad-based international acceptance of copyright protection,[59]
  • The existence of a web of international copyright protection agreements to which the United States is party,[60] and
  • The long-standing efforts of the U.S. government to push for strong foreign copyright enforcement and robust copyright protection in international trade negotiations.[61]

Nevertheless, it is possible that over time, the proliferation of academic and popular critiques of existing U.S. copyright law[62] may lead to the gradual weakening of American copyright protection, consistent with the recent tendency of some policymakers to undermine patent rights.

The proposition that weakening copyright protection would somehow be socially beneficial lacks significant empirical support. To the contrary, innovation-induced welfare gains in copyright-supported sectors have soared at the very time that copyright has been under attack for expanding in scope.[63]

In particular, the rapid proliferation in recent decades of for-profit “digital goods,” including software, DVDs, E-books, video games, and Internet-enabled entertainment services such as iTunes and Netflix, demonstrates that intangible information-based products can be marketed successfully through for-profit contractual transactions in the marketplace, much as tangible goods and services are marketed. These products, which have conferred enormous new benefits on consumers, have thrived in a strong copyright environment that allows for the remuneration of creators.

Furthermore, increases in the U.S. statutory copyright term since 1790 have not really expanded the scope of copyright protection; rather, they have reapplied the Framers’ approaches to calculating copyright term while adjusting for changes in average adult life spans and international norms.[64] (Admittedly, there is a counterargument that copyright terms may have been extended beyond optimal levels as a result of aggressive rent-seeking by copyright holders.)

Even if one assumes that there is something to that argument, however, far more serious than copyright expansionism is copyright piracy: the proliferation of unauthorized reproductions of copyrighted works, which has continued to grow in severity despite the existence of statutory civil and criminal penalties for copyright infringement.[65] Specifically, the growth of “pirate industries” in different parts of the world has constrained returns to creative artists. Such reduced returns have diminished incentives for the expanded production of copyright products, many of which rely on costly advertising, promotional, and related expenditures to achieve scale and widespread distribution.

If there is a public policy problem that needs solving, it is not the need to reduce overly strong copyright protection, but rather the imperative to combat copyright piracy more effectively. While the U.S. copyright system certainly merits continued evaluation to ensure that the optimal degree of copyright protection is not exceeded,[66] there is no credible evidence that we have reached that point. Furthermore, given the grave problem of global copyright theft, this is precisely the wrong time to weaken U.S. copyright protection.

Even worse, an attenuation of American copyright not only would prove harmful to the U.S. creative community in the domestic market, but also would undermine efforts to ensure a reasonable international copyright regime. Such a weakening would make it harder for U.S. officials to argue credibly for reasonable copyright protection overseas and would discourage efforts to root out piracy around the world.

Conclusion

The popular notion that U.S. IP rights, especially patents and copyrights, are special privileges that merit less protection than more traditional property rights, both on constitutionalist grounds and on pragmatic economic policy grounds, is deeply flawed. To the contrary, the robust protection of patents and copyrights is consistent with the American constitutional tradition and with sound economic policy. Government officials need to keep that in mind when setting public policy.

—Alden F. Abbott is Deputy Director of and John, Barbara, and Victoria Rumpel Senior Legal Fellow in the Edwin Meese III Center for Legal and Judicial Studies at The Heritage Foundation.

About the Author

Alden Abbott Deputy Director of the Edwin Meese III Center for Legal and Judicial Studies and the John, Barbara, and Victoria Rumpel Senior Legal Fellow
Edwin Meese III Center for Legal and Judicial Studies

Related Issues: Legal Issues

Show references in this report

[1] See, e.g., N. Stephan Kinsella, Against Intellectual Property (2008), file:///C:/Users/abbotta/Downloads/Against%20Intellectual%20Property_2%20(1).pdf.

[2] U.S. Const. art. I, § 8, cl. 8 (“The Congress shall have Power…To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their Respective Writings and Discoveries….).

[3] U.S. Const. art. I, § 8, cl. 3 (“The Congress shall have Power…To regulate Commerce with foreign Nations, and among the several States….).

[4] See The Heritage Guide to the Constitution 153 (David F. Forte and Matthew Spalding eds., 2d ed. 2014).

[5] The following discussion draws in substantial part on Randolph J. May & Seth L. Cooper, The Constitutional Foundations of Intellectual Property (2015). Specific citations to the works referenced in this section may be found in this volume.

[6] U.S. Congress Office of Technology Assessment, Intellectual Property Rights in an Age of Electronics and Information 258 (Apr. 1986), available at https://www.princeton.edu/~ota/disk2/1986/8610/8610.PDF. The report asserts that “John Locke, for example, was one of the most influential philosophers on the Framers of the U.S. Constitution.” It then points to various sources backing this claim.

[7] John Locke, The Second Treatise of Government (1690), in Lee Stimpson and Betsy Glade, Democratic Citizenship: Documents in the History of Democracy and Citizenship in America 19–28 (1999).

[8] Id. at 22.

[9] Id. at 22–23.

[10] Id. at 22.

[11] James Madison, On Property, National Gazette, Mar. 29, 1792, available at http://www.heritage.org/initiatives/first-principles/primary-sources/madison-on-property.

[12] See May & Cooper, supra note 5.

[13] Id. at 32.

[14] See id. at 36 (citing a discussion of Blackstone’s legal philosophy found in Daniel J. Boorstein, The Mysterious Science of Law: An Essay on Blackstone’s Commentaries (1941)).

[15] Id. at 32.

[16] The Federalist No. 43 (James Madison), available at http://press-pubs.uchicago.edu/founders/documents/a1_8_8s7.html.

[17] Paul Schwartz & William Treanor, Eldlred and Lochner: Copyright Term Extension and Intellectual Property as Constitutional Property, 112 Yale L. J. 2331 (2002), available at http://scholarship.law.berkeley.edu/facpubs/64. This article makes it clear that the Founders recognized the importance of patents, making sure to discuss them in the Constitution.

[18] See George Washington, First Annual Message to Congress on the State of the Union (Jan. 8, 1790) (“I can not forbear intimating to you the expediency of giving effectual encouragement…to the introduction of new and useful inventions from abroad as to the exertions of skill and genius in producing them at home” and “there is nothing which can better deserve your patronage than the promotion of science and literature”), http://www.presidency.ucsb.edu/ws/?pid=29431.

[19] See May & Cooper, supra note 5, at 100.

[20] Id. at 103–118.

[21] See id. at 113.

[22] Robert Thibadeau, Thomas Jefferson and Intellectual Property Including Copyrights and Patents, Saturday Afternoon Adventures on the Internet (Aug. 28, 2004), http://rack1.ul.cs.cmu.edu/jefferson/.

[23] Amy Landers, Understanding Patent Law, 2 LEXIS New Providence 1 (2012).

[24] The Supreme Court unanimously affirmed Justice Marshall’s judgment in Evans v. Jordan, 13 U.S. (9 Cranch) 199 (1815).

[25] Gayler v. Wilder, 51 U.S. (10 How.) 477 (1850).

[26] Randolph May & Seth Cooper, Reaffirming the Foundations of IP Rights: Copyright and Patent in the Antebellum Era, 9 Perspectives from FSF Scholars (2014), available at http://www.insideronline.org/reader.php?id=LKBj.

[27] Joseph Story, A Familiar Exposition of the Constitution of the United States 118 (1842).

[28] Id.

[29] James Kent, 2 Commentaries on American Law 502 (10th ed. 1860).

[30] See May & Cooper, supra note 5, at 137–138.

[31] Id. at 163–185.

[32] Abraham Lincoln, Speech at Chicago, Illinois, in 2 Collected Works of Abraham Lincoln 493 (R.P. Basler et al. ed. 1953).

[33] Abraham Lincoln, Lecture on Discoveries and Inventions (1858, 1859) (emphasis in the original), http://www.abrahamlincolnonline.org/lincoln/speeches/discoveries.htm.

[34] May & Cooper, supra note 5, at 184.

[35] See, e.g., Gene Quinn, Patent Reform at All Costs: Desperate Reformer Resorts to Lies, IPWatchdog (Feb. 9, 2016), http://www.ipwatchdog.com/2016/02/09/patent-reform-at-all-costs/id=65918/.

[36] See generally Alden F. Abbott & John G. Malcolm, A Measured Approach to Patent Reform Legislation, Heritage Foundation Backgrounder No. 3035 (July 14, 2015) (concluding that “[p]recipitous, unreflective action on legislation is unwarranted, and caution should be the byword, especially since the effects of 2011 legislative changes and recent Supreme Court decisions have not yet been fully absorbed”).

[37] Such decisions include, for example, eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006) (precluding automatic injunctions for patent infringement and holding that the traditional four-part equitable test for injunctive relief applies to Patent Act cases); KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007) (making it easier to strike down a bad patent on grounds of “obviousness”); MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007) (holding that a patent licensee is not required to terminate or be in breach of its license agreement before seeking a declaratory judgment that the underlying patent is invalid, unenforceable, or not infringed); Bilski v. Kappos, 561 U.S. 593 (2010) (holding that a financial business method was an “abstract idea” not entitled to patent protection); Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617 (2008) (making it harder for a patentee to succeed in an infringement case against downstream users of a component substantially embodying a larger patented invention); Microsoft Corp. v. AT&T Corp., 550 U.S. 437 (2007) (mere software code cannot be a component of a patented invention); Nautilus, Inc. v. Biosig Instruments, Inc., 134 S. Ct. 2120 (2014) (a patent taken as a whole must inform those learned in the field of the scope of the invention with “reasonable certainty”); Alice Corp. Pty. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014) (claims regarding computer-implemented inventions, including systems, machines, processes, and items of manufacture, are not patent-eligible subject matter); Limelight Networks, Inc. v. Akamai Technologies, Inc., 134 S. Ct. 2111 (2014) (a defendant is not liable for inducing infringement of a patent when no one has directly infringed the patent); Octane Fitness LLC v. Icon Health & Fitness, Inc., 134 S. Ct. 1749 (2014) (making it easier for district court judges to find “exceptional” circumstances justifying the award of fees to the prevailing party); and Highmark Inc. v. Allcare Health Mgmt. Sys. Inc., 134 S. Ct. 1744 (2014) (making the determination of whether a case is “exceptional” to justify the award of fees a matter of trial court discretion).

[38] See generally Adam B. Jaffe & Josh Lerner, Innovation and Its Discontents (2011).

[39] See generally Alden F. Abbott, Abuse of Dominance by Patentees: A Pro-Innovation Perspective, Antitrust Source 1 (Oct. 2014), http://www.americanbar.org/content/dam/aba/publishing/antitrust_source/oct14_abbott_10_21f.authcheckdam.pdf.

[40] See generally Tom W. Bell, Intellectual Privilege (2014), http://mercatus.org/intellectualprivilege/Intellectual-Privilege.html#.VmXIyLgrK70.

[41] U.S. Dep’t of Justice & Fed. Trade Comm’n, Antitrust Guidelines for the Licensing of Intellectual Property (1995), http://www.justice.gov/atr/public/guidelines/0558.htm.

[42] Uruguay Round Agreement: TRIPS (Trade-Related Aspects of Intellectual Property Rights), World Trade Organization, https://www.wto.org/english/docs_e/legal_e/27-trips_01_e.htm.

[43] See generally Mark A. Lemley & Carl Shapiro, Probabilistic Patents, 19 J. Econ Persp. 75 (Apr. 2005).

[44] See To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy, Fed. Trade Comm’n (Oct. 2003), https://www.ftc.gov/sites/default/files/documents/reports/promote-innovation-proper-balance-competition-and-patent-law-and-policy/innovationrpt.pdf; The Evolving IP Marketplace: Aligning Patent Notice and Remedies with Competition, Fed. Trade Comm’n (Mar. 2011), https://www.ftc.gov/sites/default/files/documents/reports/evolving-ip-marketplace-aligning-patent-notice-and-remedies-competition-report-federal-trade/110307patentreport.pdf.

[45] See Richard Baker, Guest Post: America Invents Act Cost the US Economy over $1 Trillion, PatentlyO (June 8, 2015), http://patentlyo.com/patent/2015/06/america-invents-trillion.html.

[46] See supra note 37.

[47] These initiatives are discussed in sources cited in Abbott, supra note 39, at 6 n.28.

[48] See Joshua D. Wright, Commissioner, Fed. Trade Comm’n, FTC v. Actavis and the Future of Reverse Payment Cases, Remarks Delivered at the Concurrences Journal Annual Dinner (Sept. 26, 2013), https://www.ftc.gov/sites/default/files/documents/public_statements/ftc-v.actavis-future-reverse-payment-cases/130926actavis.pdf.

[49] See Abbott & Malcolm, supra note 36.

[50] See, e.g., Steve Brachmann, Will the Obama Administration Continue to Seek Amendments to the Innovation Act? IPWatchdog (July 30, 2015) (Patent and Trademark Office Director Michelle Lee “might be willing to surrender the rights of individual innovators to heed the call for sweeping, and perhaps unnecessary, patent reform”), http://www.ipwatchdog.com/2015/07/30/obama-administration-seek-amendments-to-innovation-act/id=60017/; Gene Quinn, Obama on Patents: The One-Sided USPTO Patent Litigation Beta, IPWatchdog (Feb. 26, 2014) (Obama Administration patent litigation guidance is pro-infringer rather than neutral), http://www.ipwatchdog.com/2014/02/26/obama-on-patents-the-one-sided-uspto-patent-litigation-beta/id=48273/.

[51] See Intellectual Property and the U.S. Economy: Industries in Focus, U.S. Department of Commerce (Mar. 2012), http://www.esa.doc.gov/sites/default/files/ipandtheuseconomyindustriesinfocus.pdf.

[52] The empirical and law and economics research summarized below is discussed and cited in Abbott, supra note 39, at 8–10.

[53] Daniel F. Spulber, How Patents Provide the Foundation of the Market for Inventions, 3 (June 2014) (citation omitted), http://www.law.northwestern.edu/research-faculty/searlecenter/events/roundtable/documents/Spulber_Patents_and_the_Market_for_Inventions.pdf (revised version published in 2015 in Journal of Competition Law and Economics, http://jcle.oxfordjournals.org/content/early/2015/03/19/joclec.nhv006 (abstract)).

[54] Joan Farre-Mensa, Deepak Hegde, & Alexander Ljungqvist, The Bright Side of Patents, USPTO Working Paper No. 2015-5 (Dec. 2015), http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2704028.

[55] Jay P. Kesan, Economic Rationales for the Patent System in Current Context, 22 Geo. Mason L. Rev 897, 923–24 (2015). This article provides an excellent overview of the recent research that delineates the various sorts of economic efficiencies that are promoted by the patent system.

[56] Trademark, Patent, or Copyright? U.S. Patent and Trademark Office, http://www.uspto.gov/trademarks-getting-started/trademark-basics/trademark-patent-or-copyright.

[57] See, e.g., Bell, supra note 40, passim.

[58] See Intellectual Property and the U.S. Economy, supra note 51, ch. 3, at 45.

[59] See, e.g., International Copyright Protection, Encyclopedia.com (2005), http://www.encyclopedia.com/topic/International_Copyright.aspx.

[60] See International Copyright Relations of the United States, U.S. Copyright Office, http://www.copyright.gov/circs/circ38a.pdf.

[61] See id.

[62] See, e.g., What Are the Major Criticisms of the Copyright Laws in the US? New Media Rights (2015), http://www.newmediarights.org/business_models/artist/what_are_major_criticisms_copyright_laws_us; Stephen Breyer, The Uneasy Case for Copyright: A Study of Copyright in Books, Photocopies, and Computer Programs, 84 Harvard L. Rev. 281 (1970) (arguing against expansion of the scope and duration of copyright).

[63] The following discussion draws in part upon Tom Sydnor, Can Economic and Historical Analyses End Copyright Law’s Property/Monopoly Disputes? Am. Enter. Inst. (Oct. 2015), https://www.aei.org/wp-content/uploads/2015/10/Can-economic-and-historical-analyses-end-copyright-laws-property-monopoly-disputes.pdf.

[64] See id. at 17–24.

[65] See the documentation enumerated in Thomas A. Schatz & Deborah S. Collyer, Intellectual Property: Making It Personal (2015), Citizens Against Government Waste, available at http://cagw.org/sites/default/files/pdf/Intellectual%20Property-Making%20It%20Personal_web1.pdf.

[66] The Supreme Court has deferred to Congress’s views of its own powers under the Patent and Copyright Clause, thereby leaving standing broad grants of copyright protection, although it has noted that copyright legislation might burden speech so heavily as to violate the First Amendment. See The Heritage Guide to the Constitution, supra note 4, at 152–153.