tower of copyright. Exponentiation
does its magic. In contrast to current
practice, open renewal allows protection to adjust to true innovation value
while exponential fees allow progress
to adjust to true innovation costs.
Duration grows linearly while fees grow
exponentially. Benefits and costs must
cross. IP will enter the public domain at
a time matched to economic value. And,
Compare to What We Have
Patent terms date to colonial times.
They represent a bargain that might
not be rational today. Judge Giles Rich
recounts that patent duration started
as the length of two apprenticeships.
Learning a trade as a blacksmith,
cooper (barrel maker), or printer required seven years of training. If the
apprentice invented anything of value, the master had the right to keep
it. This was the master’s bargain for
having trained the apprentice; it also
kept the master from being put out
of business when the apprentice left.
Congress extended patent duration to
three apprenticeships in 1836. It later
compromised at 17 years, between
two and three terms, where the law
stood for more than a century. U.S.
law changed again in 1995, fixing the
term at 20 years, to reconcile foreign
and domestic practices. This change
was not major, given a three-year average review cycle,f because the term
timing also changed to 20 years from
date of filing from 17 years from date
Copyright law is no better. Cur-
rent law provides a term of 70 years
plus the life of the author as set by
the 1998 Copyright Term Extension
Act (CTEA). This law is waggishly
known as the “Mickey Mouse Pro-
tection Act” based on the extensive
lobbying efforts of the Walt Disney
Company, which sought legislative
action as copyright protection was
due to expire. Sonny Bono cham-
pioned Disney’s cause in the U.S.
House of Representatives as his own
song “I Got You Babe” also received
extended shelf life.
Many economists, including five
Nobel laureates, opposed CTEA on
the grounds it could not improve
creation incentives retroactively on
works already written. Further, CTEA
could barely improve incentives prospectively for creators who would
have long been dead. These economists filed an amicus brief accompanying the Supreme Court challenge
to CTEA.g No friend-of-the-court
economists defended it. Yet the Supreme Court ruled 7 to 2 in favor of
CTEA, addressing only the limited
constitutional question of whether
Congress had authority to extend the
law retroactively and not whether it
was foolish to do so.h Politics won
The wisest social policy accounts for
reasonable differences in IP duration
for boot designs, smartphone apps,
and lifesaving drugs. What is reasonable can vary dramatically across
functions and across markets. Yet
current policy is the same regardless
of whether the boots are fads or timeless fashion, or the drugs are snake oil
or streptomycin. The option to renew
allows investments to adjust to market value. More options can create
At the same time, proper policy
must balance the promise of inno-
vation against the problem of social
costs. Opportunity costs rise increas-
ingly as networks become more con-
h “… we are not at liberty to second-guess con-
gressional ... policy judgments, however, de-
batable or … unwise they may be.” Decision
No. 01-618 in Eldred vs. Ashcroft (2003), 17.
nected and ideas can be recombined.
Spillovers matter more in a world
of bits than one of atoms. Exponen-
tially increasing renewal fees move
to match the patterns we observe in
an economy of information. The pro-
posed fee structure helps small inven-
tors especially. Fees start very low and
increase only as their ideas have time
to prove their worth. Annual renewals
also address the problem of orphan
works—ones protected by copyright
but whose authors cannot be found.
As a side benefit, such fees might
also attack subterranean and nonpracticing patents. Preventing others
from using an idea if the owner does
not use it becomes increasingly expensive. Geometric fees might not kill
a patent troll, but the space under his
bridge gets smaller and smaller with
each passing year.
In any case, neither slaying patent trolls nor extracting greater fees
from IP oligarchs is the point of our
reform. The goal is to encourage inventors and IP holders to think more
innovatively about how to profit from
recombinant innovation and network
effects. More efficient and more effective innovation creates opportunities
for innovators and customers alike.
Let IP protection be as dynamic as the
market it serves.
1. Heller, M.A. and Eisenberg, R. S. Can patents deter
innovation? The anticommons in biomedical research.
Science 280, 5364 (1998), 698–701.
2. Landes, W. M. and Posner, R. A. Indefinitely renewable
copyright. The University of Chicago Law Review
3. Landes, W. M. and Posner, R. A. The Economic Structure
of Intellectual Property Law. Harvard University
4. Moenius, J. and Trindade, V. Networks, standards and
intellectual property rights. Chapter 5 in Frontiers of
Economics and Globalization, H. Beladi and E. Choi,
Eds., (2007), 157–198.
5. Scherer, F.M. Nordhaus’ theory of optimal patent life:
A geometric reinterpretation. The American Economic
Review (1972), 422–427.
6. Schrage, M. Archaic patent laws need to be rewritten.
Los Angeles Times (Oct. 24, 1991).
7. Weitzman, M. L. Recombinant growth. Quarterly
Journal of Economics (1998), 331–360.
Michael Schrage ( firstname.lastname@example.org) is a research fellow
at the Center for Digital Business at MIT Sloan School of
Management and a visiting fellow in the Innovation and
Entrepreneurship program at Imperial College in London.
Marshall Van Alstyne ( email@example.com) is a professor in
the department of management information systems at
Boston University and a research scientist at the MIT
Center for Digital Business; Twitter: InfoEcon.
Copyright held by authors.
IP policy must
with promotion, as
the U.S. Constitution