Saturday, September 15, 2012

Kapczynski: IP Internalism

Is IP the best way to provide incentives for the production of scientific and cultural knowledge? In The Cost of Price: Why and How To Get Beyond Intellectual Property Internalism, Amy Kapczynski (Yale Law School) builds on a growing dissent from the focus on questions "internal" to IP, arguing that scholars should expand their focus to other information-generating mechanisms, such as grants, prizes, and "commons-based" production. (Full disclosure: I was an RA for Professor Kapczynski while I was a student at Yale.) Kapczynski does not argue that a particular mechanism is best; rather, she argues for an "external" approach that considers the tradeoffs and complementarities between different mechanisms in light of different normative inquiries, including values other than efficiency.

IP is not clearly more efficient than its alternatives, Kapczynski argues in Part I. Demsetz asserted that the key efficiency benefit of IP is price (i.e., the market signal that tells producers how much to invest in producing that information), but IP also leads to inefficiencies, such as racing. (But see Mark Lemley's defense of patent racing.) Another supposed advantage of IP over grants and prizes is that the government need not determine what to pay for and how much to pay (aside from setting the scope of the IP rights), but Michael Kremer and Steven Shavell and Tanguy van Ypersele have described prize systems that avoid the need to set prizes ex ante. There are also reasons to think that transaction costs for information goods are high (preventing easy distribution from creator to the one who benefits) and that price discrimination (which reduces deadweight loss) is always imperfect at best. Kapczysnki further notes that as advances in computing technology have lowered the cost of producing information online, commons-based production (on sites such as Wikipedia and YouTube, or through many open-source software projects) has become a more important mechanism for producing some types of information.

Turning next to distributive justice, Kapczynski argues in Part II that the maximize-first, distribute-second argument for rationing goods using price (i.e., with IP) has little force where IP is not more efficient than its alternatives. And IP is rarely the winner from a distributive perspective—while there are certainly areas where exceptions to IP can promote access without significantly undermining innovation, these exceptions will do little to promote innovation. Kapczynski argues that for basic information goods (ones we believe everyone should have, such as education or healthcare), "the central virtue of IP [i.e., the market signal of price] is no virtue at all," favoring government procurement through contracts and prizes. And even for nonbasic information goods (like popular music), we might prefer a system that wins on distributive grounds if there is really no tradeoff in efficiency.

Part III, in what strikes me as one of the most creative moves of the article, points out a tension between IP and a different value: informational privacy. Scholars like Julie Cohen have discussed specific privacy issues in copyright enforcement, but Kapczynski's contribution is the more general observation that this tension between IP and privacy is inevitable. In short, she argues that once we choose an information-generating approach based on price, we then want (on efficiency grounds) to use price discrimination to reduce deadweight loss, and accurate price discrimination requires personal information.

Critiquing IP from the perspective of distributive justice or liberty is not new—for example, Madhavi Sunder's From Goods to a Good Life, which has been thoroughly discussed in a symposium at Concurring Opinions this past week, "provides a compelling intellectual history of the field." But Kapczynski is doing more than this: she argues that even if you are primarily motivated by efficiency and think distributive or privacy concerns are secondary, there may be no efficiency tradeoff between IP and its alternatives, which means these secondary considerations are worth thinking about. I don't think The Cost of Price really proves (or attempts to prove) that there isn't an efficiency tradeoff between IP and its alternatives—but I agree there is no compelling evidence that there is an efficiency tradeoff, which raises questions about why we have focused so heavily on IP. Kapczysnki does not purport to have answers to most of the questions she raises, and she notes that she is not arguing that IP's alternatives are always superior, but she asks some tough questions for defenders of the current narrow focus on IP as our primary approach for producing information goods.


  1. Relatedly, see

  2. And here's another discussion of Kapzynski's article by another former RA of hers (no, she did not ask us to publicize her work!):