Intellectual Property

Intellectual Property

Article Snapshot


Suzanne Scotchmer


in Handbook of Law & Economics, Mitch Polinsky & Steven Shavell, eds., Amsterdam: Elsevier Press, Nov. 2005


This paper surveys many studies of copyright and patent law.

Policy Relevance

Innovation is important to economic growth. Exactly how and when intellectual property law (IP) supports innovation and creativity is harder to determine.

Main Points

  • The main types of IP law that support innovation are copyright, patents, and trade secrets.  Other IP rules, like trademarks, help markets avoid confusion of brands.

  • Some innovation, like the ball-point pen or works of art is “stand-alone” and does not spur follow-on innovation. Studies here consider how easily protection can be obtained. Some worry that courts made it too easy to obtain a patent. 

  • With “cumulative” innovation, one idea, such the electric light, spurs many following ideas. Scholars are concerned that IP rights for the first idea might impede later inventors, or that competition from later inventors might destroy the first innovator.

  • Economists vary in their views as to whether licensing works smoothly or is apt to fail.

  • What subjects and areas should be protected by IP is controversial. Many scholars criticize the courts for allowing patents on business methods.

  • Other key topics include the design of courts and agencies to handle IP issues, remedies and IP enforcement, the interaction of IP law with competition policy, how industries are structured, alternatives to fund R&D, like prizes, and international treaties.

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