JEL Classification: D23. K11 L22 INTELLECTUAL PROPERTY LAW AND THE BOUNDARIES OF THE FIRM Oren Bar-Gill and Gideon Parchomovsky Abstract Arrow's disclosure paradox implies that information that is not afforded legal protection cannot be bought or sold on the market. This paper emphasizes the important relationship between the paradox of disclosure and the boundaries of the firm question. Only legally protected inventions, i. e, patented inventions, may be traded; pre-patent stages of the innovation process may not. Consequently, by force of law, rather than by the guidance of economic principle, pre-patent innovation must be carried out within the boundaries of a single firm Keywords: Boundaries of the firm, disclosure paradox, intellectual property law Harvard University, the Society of Fellows, and Harvard Law School, the John M. Olin Center for Law Economics and business University of Pennsylvania Law s This paper greatly benefited omments and criticisms by L k Omr Ben-Shahar. Yochai Benkler. James Chaim fershtman. Zohar liver hart. Josh Lemer Robert Merges, Eric Posner, Ariel Mark Ramseyer, Edward Rock, Chris Sanchirico, Peter Siegelman, Omri Y adlin and seminar participants at boston university and penn we thank efrat procaccia for excellent research assistance. Finally, we thank the John M. Olin Center for Law, Economics and Business at Harvard Law School and the William F. Milton Fund of Harvard University for generous financial supportJEL Classification: D23, K11, L22. INTELLECTUAL PROPERTY LAW AND THE BOUNDARIES OF THE FIRM Oren Bar-Gill* and Gideon Parchomovsky** Abstract Arrow’s disclosure paradox implies that information that is not afforded legal protection cannot be bought or sold on the market. This paper emphasizes the important relationship between the paradox of disclosure and the boundaries of the firm question. Only legally protected inventions, i.e., patented inventions, may be traded; pre-patent stages of the innovation process may not. Consequently, by force of law, rather than by the guidance of economic principle, pre-patent innovation must be carried out within the boundaries of a single firm. Keywords: Boundaries of the firm, disclosure paradox, intellectual property law. * Harvard University, the Society of Fellows, and Harvard Law School, the John M. Olin Center for Law, Economics and Business. ** University of Pennsylvania Law School. This paper greatly benefited from comments and criticisms by Ian Ayres, Lucian Bebchuk, Omri Ben-Shahar, Yochai Benkler, James Bessen, Chaim Fershtman, Zohar Goshen, Oliver Hart, Josh Lerner, Robert Merges, Eric Posner, Ariel Porat, Mark Ramseyer, Edward Rock, Chris Sanchirico, Peter Siegelman, Omri Yadlin and seminar participants at Boston University and Penn. We thank Efrat Procaccia for excellent research assistance. Finally, we thank the John M. Olin Center for Law, Economics and Business at Harvard Law School and the William F. Milton Fund of Harvard University for generous financial support