Cry, the Beloved Clause

If you’re an economist, you have to love the IP clause. After all, how many clauses in the Constitution set up an explicit economic analysis? Very few. But there’s pretty widespread agreement that the IP clause is broken.

The interplay of the technology, the law, and the economics of the information sector poses many potential challenges. Lessig’s, Litman’s, and even Vaidhyanathan’s concerns went far beyond my own narrow focus on the market. Their worries go to the heart of civil society—to our ability to communicate freely. Others have voiced even broader concerns. Cass Sunstein worries that the Internet’s customization will fragment society.³³ He sees us becoming a world of narrow people and groups, feeding only on the ideas and opinions to which we already sub­scribe, and filtering out all that could make us rethink our positions or consider alternative viewpoints. The Internet allows each of us to design customized media channels. Sunstein fears that once we successfully block all that we find offensive or irrelevant, we’ll become islands unto ourselves. Can communities arise in such a world? Will democracy have any meaning? Will we continue to view tolerance as a virtue? Julie Cohen has asked if we’ll still be able to read anonymously—and if not, what that may mean for the future of intellectual curiosity and development.³⁴

These compelling questions point to a potential dark side of the infor­mation age. They raise the specter of reduced privacy, democracy, intel­lectual development, and free communication. The potential restriction of our Constitutional right to privacy³⁵ is certainly more frightening— and more fundamental to our identity as a free people—than are Con­gressional missteps on IP policy that hinder innovation.

We’re giving away a very powerful combination of rights that enables antisocial and anticompetitive behavior—largely by software developers misusing the rights we’ve given them. While it’s certainly possible to simply grant the rights, to assume that innovators will wield their rights responsibly, and to clean up inappropriate uses with industrial-strength antitrust laws and misuse remedies, that sort of approach is exceedingly dangerous. An IP system that conferred appropriate rights and that minimized the rights-holders’ ability to abuse them would serve us better. But the potential hazards of the wrong reform are equally obvious: they could destroy the current strengths of a thriving information sector while offering little of value in return. We need “moderate and cautious, but potentially radical” reform—a pretty tough challenge.

In thinking through such reforms, The Digital Dilemma is right. If we’re going to consider reform proposals, we must project the full range of each proposal’s costs and benefits. Our analysis must recognize that the costs inherent in an IP regime aren’t restricted to the balance between risks and rewards that they offer innovators, or even to the societal costs and benefits of progress. They also include both the transaction costs inherent in running a policy regime and the potentially large one­time transition costs inherent in regime change. These transaction and transition costs can be significant, and they are relevant to the ultimate attractiveness of a proposed reform. They’re distinct, however, from a consideration of the merits of a proposed regime change. Even if we can figure out how to fix things—and prove that our fix is really an improve- ment—we still may lose the argument if the method of getting from here to there is too difficult or too costly.

But darkness need not exist forever. We have some good legal doc­trines to help us clean up our worst messes. Justice Ginsburg may (or may not) have put innovators on notice that their rights could weaken overnight, and we may find additional ways help ourselves along. The extent to which self-help is possible depends on how Congress allocates, and the courts interpret, the property rights underlying information products. For while technology will always delineate our opportunities, and while economic incentives will always dictate which we choose, our legal system will play a critical role in allocating the costs and the ben­efits of each alternative. The IP system’s assignment of property rights will be at the center of the information sector’s legal maelstrom. When we leave the confines of academic discourse to enter the real world, we’ll see those legal issues arise in many contexts and in many ways. We’ll revisit the Manifesto and copyright misuse when we contemplate Microsoft, open source when we meet Linux, and transaction costs and the very nature of IP rights when we consider Napster. The true battle lines over the information sector’s future are just forming, as technology reduces transaction costs and traditional distributors fight—frequently using the weapons of IP and of public policy—to reintroduce them.

Soon IP rights will permeate everything that we say about the infor­mation sector, for information never truly can be owned. Information­sector businesses must all manipulate a legally constructed notion of ideas as property. And that, in turn, implies that every question that we ask about the way that things are will touch upon IP law, and every ques­tion we ask about the way that things should be will touch upon IP policy. We will only reach the information sector we seek—the one con­sistent with the Constitutional prescription of IP policy, the one that appropriately aligns the concerns of technology, economics, and law—if we consider the ways these factors interact in the real worlds of software development and investment in innovation.