Have created a shift in the source of value for many goods and services Have enabled separation of information from physical form Some business issues raised by the shift to information goods Intellectual Property Quick Review Changes in technology Ownership protection Pricing What are Property Rights Rights of possession Allows individual to use the property Usually a bundle of rights build cultivate leave it idle Prevents others from using the property Rights of transfer Right to transfer the rights of possession Why Property Rights Incentives to work Aristotle 350 BC Each individual has the right to her output This encourages individuals to invest the optimal effort Incentive to maintain and improve things Absence of property rights tragedy of the commons Incentive to transfer things Leads to beneficial trade Makes production more efficient Specialization Avoidance of Disputes Prevents socially wasteful unproductive activities protection damage dispute resolution Hobbes 1651 What is Intellectual Property creations of the mind inventions literary and artistic works and symbols names images and designs used in commerce Examples Scientific discoveries Engineering designs Pharmaceutical formulas Ideas for Internet businesses Corporate names slogans logos Novels poems plays films musical works drawings paintings photographs sculptures architectural designs Public Goods Non rival One person s consumption doesn t diminish the amount available to another Nonexcludable It is costly to exclude people who do not pay from consuming the good o Ex Lighthouse National defense TV radio broadcasts Protecting Intellectual Property Copyright Act 1790 Patent Act 1790 Semiconductor Chip Protection Act 1984 Sound Recordings Act 1995 Digital Millennium Copyright Act 1998 Protection of trade secrets Protection against misappropriation of information of commercial value Patents Copyright Rights The right to exclude all others from making selling or using invention for up to 20 years Can prevent an independent discoverer of the same matter from making selling using Automatic does not require formal filing Grants rights for lifetime 70 years author 95 years company Under the First Amendment use of copyrighted material is permitted without the author s consent under some circumstances Guidelines for determining what is fair use o Purpose and character of use o Nature of the copyrighted work o Amount and substantiality of the portion of work used o Reproduction transcribe imitate in fixed form o Distribution of copies sale rent lease or lend o Public performance display o Preparation of derivative works Authorization of others to do any of the above Copyright Limitations Some Works Cannot be Copyrighted Facts Works not fixed on a sufficiently permanent medium Works in the public domain copyright expired Works created by the US government laws and legislations Copyright Fair Use Effect on value of work o Example of fair use Image search Why is this unique to Intellectual Property Physical goods Rivaled and Excludable Only one person can use a physical good at a time Costly to the owner Transactions costs are not prohibitive So it is inefficient to let anyone else borrow it without negotiating with the owner Digital Goods Simultaneous use is feasible Transaction costs are usually high Fair use is OK as long as it does not cause economic loss to owner Trademarks and Trade Secrets Trademark Source indicator Must be registered Infinitely renewable Trade Secret Not registered Theoretically unlimited protection Examples recipes
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