BOOK REPORT: “THE KNOCKOFF ECONOMY”

The over-arching economic problem that dogs all of American patent and copyright law is one of demarcation—when is the marginal utility of  an incentive provided to one innovator “to promote progress in science and the useful arts” outweighed by the burden it places on the creativity and economic freedom of everyone else and is therefore counterproductive?  In The Knockoff Economy: How Imitation Sparks Innovation (Oxford Univ. Press), Law Professors Kal Raustiala of UCLA and Christopher Sprigman of the University of Virginia attack this problem from a novel angle, examining  fields of creative endeavor that seemingly flourish in the absence of patent or copyright protection and in the face of rampant and easy copying—fields such as couture fashion, haute cuisine, stand-up comedy, high finance, and professional (and big-time college) football.  Their approach, more anecdotal and even dishy than empirically rigorous, results in a study that is timely, enjoyable, original, and informative, though it falls short of forming a rock-solid foundation for the broad generalizations about IP law and its application to other fields that the authors seek to draw.

Raustiala and Sprigman’s discussion of each field follows a similar template.  First, there is a capsule history tracing its origins as a humble trade in early 20th Century America to its more recent emergence as an admired creative engine driven by auteurs and masters-of-the-universe.  This is followed by a discussion of the extent to which various forms of intellectual property protection—in particular copyright, but also patent, trademark, trade dress, and trade secret law—do or do not cover its wares.  The legal discussions are concise and non-technical, and in the aggregate will provide the non-lawyer with a useful overview of the fundamentals of intellectual property law.

The most original and interesting contributions of The Knockoff Economy  are what follows, as the authors attempt to unlock the secrets of how creativity abides and may even by enhanced (what they call the “piracy paradox”) in the absence of strong legal protections against copying.  They focus on such economic and sociological factors as  product lifecycles, first mover advantages, positive feedback loops and network effects (my terminology, not theirs), branding,  product bundling,  open sourcing, and self-regulation.  The evidence of vibrant creativity in the midst of cultures of imitation, the authors argue, undermines what they deem to be the primary reason IP law regulates copying, what they call “the monopoly theory of innovation,” i.e., that “creators need a monopoly over the right to make copies” because “copying kills creativity.”

This may seem to some, as it did to me, something of a strawman.  Neither patents nor copyrights  grant anything like an economic monopoly (that is, market power to raise prices and restrict output in a definable market that includes all interchangeable products), and both areas of law tolerate many forms of copying and, especially, near-copying.  The authors acknowledge these nuances, but only in footnotes.  This is understandable in a book that seeks and deserves a wide audience, but the over-simplification may deflect attention away from the market structure of these industries, and specifically from asking whether the innovators and the copiers are truly even competing in the same market.

Couture designers, as the authors note in passing, simply have no desire to compete for the business of the hoi polloi at “popular prices,” and high-end restauranteurs lack the capacity (unless they want to franchise, in which case other protections will kick in) to meet demand for their concoctions outside of a narrow geographic market.  Although claims that the NFL and NCAA are single entities have been questioned when it comes to selling broadcast rights or logo merchandise, the competition between teams on the field is not economic; under the still-viable Pete Rozelle concept of “league think” it is in every team’s interest to put on  entertaining and competitive contests.  And so on.  Where copiers do not constitute economic competition, protection against copying could only be justified on moral grounds, which the authors correctly note is not a cognizable interest under our IP law.

Raustiala and Sprigman point out that the legal rationales on which things like fashion and food have been denied protection under patent and copyright law are not always persuasive or consistent; nonetheless, the very fact that these thriving endeavors lack such protection may indicate that Congress and the courts have somehow devised inexact but workable rules of demarcation.

I could go on.  It should be apparent from these ramblings that I found the The Knockoff Economy both stimulating and (with apologies to David Letterman) more fun than an intellectual property lawyer should be allowed to have. 

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