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The Fashion Lottery: Cooperative Innovation In Stochastic Markets, Jonathan Barnett, Gilles Grolleau, Sana El Harbi
The Fashion Lottery: Cooperative Innovation In Stochastic Markets, Jonathan Barnett, Gilles Grolleau, Sana El Harbi
Jonathan M Barnett
The fashion market is an anomaly: innovation is vigorous but original producers are substantially unprotected against imitation, which proliferates under an incomplete property regime consisting of strong trademark protections and weak design protections. We account for this anomaly through a “cooperative innovation” model where producers prefer an incomplete property regime that permits some imitation to alternative regimes that permit no imitation or all imitation, independent of budget constraints. A property regime that permits positive but limited levels of imitation operates as a form of group insurance that alleviates the risk of recoupment failure in a market characterized by demand uncertainty, …
Copyright Without Creators, Jonathan M. Barnett
Copyright Without Creators, Jonathan M. Barnett
Jonathan M Barnett
Copyright is typically justified by the rationale that profits induce authors and other artists to invest resources in cultural production. This rationale is vulnerable to the objection that some artists have intrinsic incentives to invest in cultural production and do not require significant capital to do so. Even accepting this objection, copyright is justified by an alternative rationale: it supports the profit-motivated intermediaries that bear the high costs and risks involved in evaluating, distributing and marketing content in mass-cultural markets. This “authorless” rationale is consistent with the intermediated structure of mature mass-cultural markets and accounts for long-standing features of copyright …
The Host's Dilemma: Strategic Forfeiture In Platform Markets For Informational Goods, Jonathan M. Barnett
The Host's Dilemma: Strategic Forfeiture In Platform Markets For Informational Goods, Jonathan M. Barnett
Jonathan M Barnett
Voluntary forfeiture of intellectual assets—often, exceptionally valuable assets--is surprisingly widespread in information technology markets. A simple economic rationale can account for these practices. By giving away access to core technologies, a platform holder commits against expropriating (and thereby induces) user investments that support platform value. To generate revenues that cover development and maintenance costs, the platform holder must regulate access to other goods and services within the total consumption bundle. The tradeoff between forfeiting access (to induce adoption) and regulating access (to recover costs) anticipates the substantial convergence of open and closed innovation models. Organizational patterns in the software and …
Intermediaries Revisited: Is Efficient Certification Consistent With Profit Maximization?, Jonathan M. Barnett
Intermediaries Revisited: Is Efficient Certification Consistent With Profit Maximization?, Jonathan M. Barnett
Jonathan M Barnett
Private certification mechanisms are a key component of the regulatory infrastructure in the financial sector and other commercial settings. It is generally assumed that certification intermediaries have profit-based incentives to deliver accurate information to the certified market. But this view does not account for repeated failures in certification markets. Those failures can be explained by an inherent defect in the incentive structure of certification intermediaries: entry barriers both support and undermine the consistent supply of accurate information to the certified market. Certification markets tend to converge on a handful of providers protected by switching costs, product opacity and reputational noise. …
Intellectual Property As A Law Of Organization, Jonathan M. Barnett
Intellectual Property As A Law Of Organization, Jonathan M. Barnett
Jonathan M Barnett
The incentive thesis for patents is challenged by the existence of alternative means by which firms can capture returns on innovation. Taking into account patent alternatives yields a robust reformulation of the incentive thesis as mediated by organizational form. Patents enable innovators to make efficient selections of firm scope by transacting with least-cost suppliers of commercialization inputs. These expanded transactional opportunities reduce the minimum size of the market into which any innovator—or the supplier of any other technological or production input—can attempt entry. Disaggregation of the innovation and commercialization process then induces the formation of secondary markets in disembodied technology …
Is Intellectual Property Trivial?, Jonathan M. Barnett
Is Intellectual Property Trivial?, Jonathan M. Barnett
Jonathan M Barnett
We typically assume that intellectual property makes a substantial difference in regulating access to intellectual goods and thereby provides incentives for the production of intellectual goods. But the existence of alternative instruments by which to appropriate innovation returns suggests that even substantial changes in intellectual property may often make little difference in regulating access, which in turn means that those changes may often make little difference in regulating innovation incentives. This raises a conundrum: in markets where “more or less IP” exerts no substantial effect on access costs and innovation gains, why do firms expend resources on influencing changes in …
Property As Process: How Innovation Markets Select Innovation Regimes, Jonathan M. Barnett
Property As Process: How Innovation Markets Select Innovation Regimes, Jonathan M. Barnett
Jonathan M Barnett
It is commonly asserted that innovation markets suffer from excessive intellectualproperty protections, which in turn stifle output. But empirical inquiries can neither confirm nor deny this assertion. Under the “agnostic” assumption that we cannot assess directly whether intellectual-property coverage is excessive, an alternative query is proposed: can the market assess if any “propertization outcome” is excessive and then undertake actions to yield a socially preferable outcome? Grounded in the “bottom up” methodology of new institutional economics, this process-based approach takes the view that innovator populations make rent-seeking investments that continuously “select” among a range of “innovation regimes” that trade off …
What's So Bad About Stealing?, Jonathan M. Barnett
What's So Bad About Stealing?, Jonathan M. Barnett
Jonathan M Barnett
The moral prohibition against theft, and legal causes of action against trespass and like activities, are usually stated in absolutist terms that admit few exceptions. But application of the theft prohibition to creative goods is incomplete and unstable across industries, regions and periods. Existing economic explanations for the theft prohibition either overestimate its scope of application in creative environments or fail to specify a mechanism by which adjustments in its scope are implemented. A “power” approach that ties changes in the moral and legal treatment of “creative theft” to the distribution of formal and informal “influence capacities” across affected populations …
Certification Drag: The Opinion Puzzle And Other Transactional Curiosities, Jonathan Barnett
Certification Drag: The Opinion Puzzle And Other Transactional Curiosities, Jonathan Barnett
Jonathan M Barnett
The law-and-economics literature typically depicts certification intermediaries, such as law firms, auditors, underwriters, investment banks and rating agencies, as socially valuable market participants who ameliorate informational asymmetries that would otherwise distort pricing or transaction structures. This standard view is incomplete. Using the example of the “closing opinion”, a third-party legal opinion commonly delivered at the consummation of a variety of business transactions, I argue that intermediaries, even when operating under substantially competitive conditions and in sophisticated market settings, may supply widely consumed certification products that fail to mitigate informational asymmetries while increasing transaction costs. Based on the highly qualified language …
Hollywood Deals: Soft Contracts For Hard Markets, Jonathan Barnett
Hollywood Deals: Soft Contracts For Hard Markets, Jonathan Barnett
Jonathan M Barnett
Hollywood film studios, talent and other deal participants regularly commit to, and undertake production of, high-stakes film projects on the basis of unsigned “deal memos”, informal communications or draft agreements whose legal enforceability is uncertain. These “soft contracts” constitute a hybrid instrument that addresses a challenging transactional environment where neither formal contract nor reputation effects adequately protect parties against the holdup risk and project risk inherent to a film project. Parties negotiate the degree of contractual formality, which correlates with legal enforceability, as a proxy for allocating these risks at a transaction-cost savings relative to a fully formalized and specified …
From Patent Thickets To Patent Networks: The Legal Infrastructure Of The Digital Economy, Jonathan M. Barnett
From Patent Thickets To Patent Networks: The Legal Infrastructure Of The Digital Economy, Jonathan M. Barnett
Jonathan M Barnett
Scholarly and popular commentary often assert that markets characterized by intensive patent issuance and enforcement suffer from “patent thickets” that suppress innovation. This assertion is difficult to reconcile with continuous robust levels of R&D investment, coupled with declining prices, in technology markets that have operated under intensive patent issuance and enforcement for several decades. Using network visualization software, I show that information and communication technology markets rely on patent pools and other cross-licensing structures to mitigate or avoid patent thickets and associated inefficiencies. Based on the composition, structure, terms and pricing of selected leading patent pools in the ICT market, …