Innovation and Incarceration: An Economic Analysis of Criminal Intellectual Property Law

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Citation: Jonathan Masur, Christopher Buccafusco (2014) Innovation and Incarceration: An Economic Analysis of Criminal Intellectual Property Law. Southern California Law Review (RSS)
Internet Archive Scholar (search for fulltext): Innovation and Incarceration: An Economic Analysis of Criminal Intellectual Property Law
Download: http://chicagounbound.uchicago.edu/cgi/viewcontent.cgi?article=8031&context=journal articles
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Summary

Outlines economics of IP, accepting monopoly required for optimal production, a view the authors criticize elsewhere but accept for purposes of this paper, and economics of criminal law (chance of being caught, incentives for would-be perpetrators creating damages they cannot repay, marginal punishment to deter escalation, inefficient self-help by potential victims). Property (all types) calls for less but still some reliance on criminal law than damage to persons. Summary of factors whether criminal penalties should be applied to prevent some activity (quote):

(1) What is the magnitude of the economic harm from the activity, and what are the benefits to the infringer?
(2) What is the probability that violations will be detected and prosecuted?
(3) Will the defendant likely have sufficient funds to pay a judgment?
(4) Is the economically efficient activity level zero or greater than zero?
(5) Will it be desirable to incapacitate offenders?

Argues that for copyright there is a narrow case for criminal penalties, where infringer is judgement-proof (poor) or causes great social harm (mass infringement), but with strong protection for good faith fair use activities. Looks favorably on technical use sanctions (e.g., prohibitions of using computers) as an alternative to imprisonment.

Argues that for patents criminal penalties are not economically justified: less likely infringers will be judgement-proof, detection is easier (note that processes that can be practiced in private strongest justification, but in such case creator has strong option to use trade secret to protect invention), and patent infringement very difficult to wholly avoid.


patent

Theoretical and Practical Relevance

Side note on commercial use (quote):

the No Electronic Theft ("NET") Act of 1997 modified the requirement of commercial gain to mean "the receipt, or expectation of receipt, of anything of value, including the receipt of other copyrighted works."


Side quotes on poor:

[C]arceral criminal sanctions are justifiable from an economic perspective because of difficulties in properly deterring potential offenders with civil sanctions, most frequently because offenders are insolvent or unable to pay the full judgments against them.
...
Criminal liability is especially important with respect to individual or poorly capitalized infringers of large quantities of copyrighted material who are difficult to detect and identify. Accordingly, criminal liability should focus on these situations. It would certainly be objectionable to disproportionately prosecute and imprison poor offenders. Yet focusing prosecutorial effort on those acts of infringement which are the most costly and most difficult to detect makes economic sense. Additionally, infringement prosecutions should address large-scale counterfeiting operations that market bootlegged music, movies, and software. These behaviors likely cause the most social harm, and these are the violators for whom criminal liability will pack the most deterrent punch.