Vol # THE PROBLEM OF UNIFORMITY COST A. Standard Economic Justification for Intellectual Property Rights Intellectual property rights are a second-best solution to an appropriability problem. The now-familiar utilitarian justification for ntellectual property law starts with Thomas Jefferson's observation that Informations is that no one possesses the less, because every other possesses the whole of it... [ H]e who lites his taper at mine. receives light without darkening me. For Jefferson. the capacity for information to"freely spread from one to another over the globe"is part of nature's "benevolent["design. For the economist however, the "benevolent"design of information poses a problem. To the extent that pecuniary motivation drives innovation, we should not expect to see useful information 4 produced unless the producer can recoup his or her investment. Because the distribution of valuable information cannot be controlled in the ways that distribution of scarce goods like tubes of toothpaste or radial tires might be- that is, information can be consumed nonrivalrously -the producer, acting alone, cannot rely on competitive markets to supply a sufficient return to make the investment in producing such information worthwhile. The government Letter from Thomas Jefferson to Isaac McPherson(Aug. 13, 1813), in 6 THE WRITINGS OF THOMAS JEFFERSON 180(HA. Washington, ed. 1861) s Information exhibits public goods characteristics. a public good can be consumed without depletion (non-rivalrous consumption) and can be withheld from nonpaying beneficiaries only at prohibitive cost (non-excludability ) See RoBert COoTER THOMAS ULEN, LAW AND ECONOMICS 40-41(2d ed. 1997); see also wilfried Ver eecl Public Goods: An Ideal Concept, 28 J OF SOCIO-ECONOMICS 139(1999). Information imperfectly excludable but it is because it is its non-rivalrous quality that makes it problematic The terms"valuable" anduseful" information in this article refer to information that is costly to produce and that members of our society find to be useful, informative enriching, or otherwise of value. Such information includes the ideas and expressions or embodiments of those ideas found in, for example, novels, movies, music, methods for manufacturing useful articles(medicines, computers, clothing, etc. ) computer software S Eg, Mark A. Lemley, The Economics of Improvement in Intellectual Property, 75 TEX. L REv. 989, 994(1997)[hereinafter Lemley, Economics of Improvement]("In a private market economy, individuals will not invest in invention or creation... unless they can reasonably expect to make a profit from the endeavor. ") Christian Koboldt Intellectual Property and Optimal Copyright Protection, 19 J OF CULTURAL ECON. 131 134(1995)(same) See, e.g, CARL SHAPIRo HAL VARIAN, INFORMATION RULES: A STRATEGIC GUIDE TO THE NETWORK ECONOMY 3(1999), F M. SChERER DAvID ROSs, INDUSTRIALVol. ##] THE PROBLEM OF UNIFORMITY COST 6 A. Standard Economic Justification for Intellectual Property Rights Intellectual property rights are a second-best solution to an “appropriability problem.” The now-familiar utilitarian justification for intellectual property law starts with Thomas Jefferson=s observation that information=s Apeculiar character . . . is that no one possesses the less, because every other possesses the whole of it. . . . . [H]e who lites his taper at mine, receives light without darkening me.@ 11 For Jefferson, the capacity for information to Afreely spread from one to another over the globe@ is part of nature=s Abenevolent[]@ design.12 For the economist, however, the Abenevolent@ design of information poses a problem.13 To the extent that pecuniary motivation drives innovation, we should not expect to see useful information14 produced unless the producer can recoup his or her investment.15 Because the distribution of valuable information cannot be controlled in the ways that distribution of scarce goods like tubes of toothpaste or radial tires might be B that is, information can be consumed nonrivalrously B the producer, acting alone, cannot rely on competitive markets to supply a sufficient return to make the investment in producing such information worthwhile.16 The government 11 Letter from Thomas Jefferson to Isaac McPherson (Aug. 13, 1813), in 6 THE WRITINGS OF THOMAS JEFFERSON 180 (H.A. Washington, ed. 1861). 12 Id. 13 Information exhibits public goods characteristics. A public good can be consumed without depletion (non-rivalrous consumption) and can be withheld from nonpaying beneficiaries only at prohibitive cost (non-excludability). See ROBERT COOTER & THOMAS ULEN, LAW AND ECONOMICS 40-41 (2d ed. 1997); see also Wilfried Ver Eecke, Public Goods: An Ideal Concept, 28 J. OF SOCIO-ECONOMICS 139 (1999). Information is imperfectly excludable but it is because it is its non-rivalrous quality that makes it “problematic.” 14 The terms Avaluable@ and Auseful@ information in this Article refer to information that is costly to produce and that members of our society find to be useful, informative, enriching, or otherwise of value. Such information includes the ideas and expressions or embodiments of those ideas found in, for example, novels, movies, music, methods for manufacturing useful articles (medicines, computers, clothing, etc.), computer software, etc. 15 E.g., Mark A. Lemley, The Economics of Improvement in Intellectual Property, 75 TEX. L. REV. 989, 994 (1997) [hereinafter Lemley, Economics of Improvement] (AIn a private market economy, individuals will not invest in invention or creation . . . unless they can reasonably expect to make a profit from the endeavor.@); Christian Koboldt, Intellectual Property and Optimal Copyright Protection, 19 J. OF CULTURAL ECON. 131, 134 (1995) (same). 16 See, e.g., CARL SHAPIRO & HAL VARIAN, INFORMATION RULES: A STRATEGIC GUIDE TO THE NETWORK ECONOMY 3 (1999); F.M. SCHERER & DAVID ROSS, INDUSTRIAL