Christopher Buccafusco and Jonathan S. Masur
University of Chicago Law & Economics Working Paper
Excerpt from introduction:
This Article offers an economic analysis of the use of criminal liability in two areas of IP: copyright law and patent law. Our goal is to analyze the relative costs and benefits of criminal sanctions for IP violations. Economic analysis is particularly appropriate to this discussion for a number of reasons.
Copyright and patent law are widely recognized as resting on utilitarian foundations of promoting social welfare by incentivizing investment in informational goods. They do this by providing exclusive rights to creators of IP that allow them to charge prices for use that are above marginal cost. Yet IP’s commitment to incentives to create must be balanced by the costs that those rights have for others who want to use or further develop the works and inventions that have been created. Economic analysis’s explicit focus on utilitarian welfare calculus, which compares the costs and benefits of legal rules, can aid in striking the correct balance.
An explicitly economic focus on criminal sanctions in IP—to the exclusion of other normative methodologies—is important for an additional reason. Many IP stakeholders and scholars have operated under the assumption that there is an economic case for criminal IP sanctions.9 Criminal sanctions for IP infringement are thought to be justified by the possibility of deterring or incapacitating would-be infringers. When criminal IP sanctions have been criticized, the criticism has usually come from a normative position outside of economics—moral rights, for instance.10 The economic case for criminal sanctions is usually treated as unassailable.
In this article, we mean to assail it. We do not believe that the case for criminal sanctions in IP is nearly as strong as many have treated it. Indeed, we will argue that criminal liability may be justified only in one small corner of IP law, in response to one discrete type of infringement. We believe that our analysis is particularly important because it undermines the economic case for criminal sanctions at its very foundation. There is no need to engage in complicated and frequently unresolvable debates about economic versus moral norms if both modes of thought militate equally against criminal IP penalties. Even without venturing into the deep waters of normative debate, we believe the range of economically justifiable criminal IP sanctions is quite narrow.
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