Patents and copyrights: key differences and applications

Economics -- Proprietary Intellectual Rights

I would argue, in principle, that patents and copyrights perform the same essential function in the market, that they do not create monopolies, but that they are justified by slightly different underlying rationales. More specifically, both patents and copyrights grant exclusive rights to profit from ideas to the creator of those ideas (Edwards, Wattenberg, & Lineberry, 2009; Halbert & Ingulli, 2008). However, there is a fundamental conceptual difference between monopolies and recognition of the rights that flow from independent initiative simply because the benefits that are attributable to patents and copyrights would not exist for any market participant but for the independent initiative of the owner of those rights.

Gasoline or steel, for example, could be produced and sold to market by any market entrant with the capacity to overcome the natural barriers of doing so. Therefore, the award of exclusive rights in those industries would constitute an artificial monopolistic rights granted by government. However, at the outset, all prospective inventors and authors have the same right to create any work of their choice that might generate profit. In the case of both patent rights and copyrights, the award of exclusivity is justified to prevent other entities that did not contribute to the development of marketable ideas or products from benefiting from the work of entities that created that value. This is merely one manifestation of a classic legal principle of avoiding unjust enrichment (Halbert & Ingulli, 2008). To the extent they can be differentiated, it is only that the underlying motivation for recognizing patent rights is that doing so promotes innovation whereas copyrights are mainly related only to unjust enrichment concepts.