Property, Intellectual Property, and Free Riding by MARK A. LEMLEY (August 2004)

Property, Intellectual Property, and Free Riding by MARK A. LEMLEY (August 2004)
Abstract: Courts and scholars have increasingly assumed that intellectual property is a form of property, and have applied the economic insights of Harold Demsetz and other property theorists to condemn the use of intellectual property by others as “free riding.” In this article, I argue that this represents a fundamental misapplication of the economic theory of property. The economics of property is concerned with internalizing negative externalities – harms that one person’s use of land does to another’s interest to it, as in the familiar tragedy of the commons. But the externalities in intellectual property are positive, not negative, and property theory offers little or no justification for internalizing positive externalities. Indeed, doing so is at odds with the logic and functioning of the market. From this core insight, I proceed to explain why free riding is desirable in intellectual property cases except in limited circumstances where curbing it is necessary to encourage creativity. I explain why economic theory demonstrates that too much protection is just as bad as not enough protection, and therefore why intellectual property law must search for balance, not free riders. Finally, I consider whether we would be better served by another metaphor than the misused notion of intellectual property as a form of tangible property.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=582602

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