Toward an Integrated Theory of Intellectual Property

Gideon Parchomovsky, University of Pennsylvania Law School
Peter Siegelman, University of Connecticut School of Law

Abstract

This Article addresses a curious gap in the theory of intellectual property. One of the central dogmas in both the legal and economic literatures is that patents, copyrights and trademarks constitute separate forms of protection, each serving different purposes and designed to operate independently of the others. By challenging this dogma, however, this Article shows that certain combinations of intellectual property protection give rise to important synergies. When a patentee can develop brand loyalty among its customers, the existence of trademark protection allows her to extend its protection even after her patent expires, and thereby earn higher profits than would be possible without such leverage. Paradoxically, our model reveals that this patent/trademark leverage is actually efficiency-enhancing: it gives patentees an incentive to price less monopolistically than they would if their protection terminated upon the expiration of the patent. Importantly, this is not a purely theoretical result: several case studies demonstrate that firms actually do combine patent and trademark protection in much the way we describe. We show that the same synergies are at work when trade-secrecy is combined with trademark protection. The unique perspective we develop in the Article has important descriptive, normative, and methodological implications. Descriptively, we show that the deadweight loss of patent and trade secrecy protection is lower than is commonly believed, and that incentives to innovate are higher. Normatively, we call for a reversal of the prevailing judicial hostility to combining patent and trademark protection, and explain how the law can take advantage of leveraged patents to improve the tradeoff between dynamic and static efficiencies in innovation policy. For example, we demonstrate how policymakers can shorten patent protection, while simultaneously increasing incentives to innovate. Moreover, we design a separating mechanism that accomplishes this desirable result without imposing undue informational burdens on policymakers. Finally, we highlight the need for an integrated analysis of intellectual property. When synergies exist, exclusive focus on the parts often leads to an incomplete and distorted perception of the whole.