¹Examples include films, audio recording, and photographs, all of which are now covered by copyright law, and the engineered bacteria that were the subject of Diamond v. Chakrabarty (S447 U.S. 303, 100 S. Ct. 2204, 65 L.Ed. 2d 144), which the court concluded were patentable subject matter.

²Examples include the Semiconductor Chip Protection Act, the 1930 Plant Patent Act (protecting asexually reproduced plants) and the 1970 Plant Variety Protection Act (protecting sexually reproduced plants).

³The analogy to a cam was made by Copyright Commissioner (and author) John Hersey in his dissenting opinion in the CONTU final report, p. 28. Judge Flaum in Data Cash Systems, Inc., v. JS&A Group, Inc. 480 F. Supp. 1063 (N.D. Ill. 1979) described a machine language program on a ROM as "a mechanical tool or a machine part." A pre-computer case reaching a similar result (for a roll controlling a player piano) is White-Smith Music Publishing Co. v. Apollo Co., 209 U.S. 1 (1908). White-Smith was cited in some of the early computer copyright cases, before the 1976 Copyright act and its 1980 amendment made it clear that computer programs, in both source and machine code form, were copyrightable.

⁴Strictly speaking, something is not intellectual property unless it is protected. Intellectual creations that are left unprotected might more properly be described as "potential intellectual property." For simplicity, I will use "intellectual property" to cover both protected and unprotected forms.

⁵The issue of standards has been discussed at some length in the economics literature, largely under the rubric of "Network Externalities." See Michael Katz and Carl Shapiro, "Network Externalities, Competition, and Compatibility," American Economic Review, June 1985, 75:3, 424-440. The spring 1994 issue of the JEP, which should be available at about the same time as the article you are reading, will contain a symposium on the subject. One of the articles, by S. J. Liebowitz and Stephen E. Margolis, discusses the issue of ownership

of standards.

⁶See, for example, D. Friedman, Price Theory: An Intermediate Text. 2nd edn., South-western, 1990.

⁷For a fascinating exploration of this topic in the very different context of primitive societies, see Martin Bailey, "Approximate Optimality of Aboriginal Property Rights," Journal of Law and Economics XXXV (April 1991), pp. 183-198.

⁸Houston v. United States Gypsum Company, United States Court of Appeals for the Fifth Circuit (1981), 652 F.2d 467.

⁹The court finessed the problem by deciding in favor of Houston on grounds of adverse possession.

¹⁰P.J. Hill and Terry Anderson, "Privatizing the Commons: An Improvement?", Southern Economic Journal, October 1983; "The Evolution of Property Rights: A Study of the American West," Journal of Law and Economics, April 1975.

¹¹In most countries, the patent goes to the first inventor to file. In the U.S. it goes to the first to invent, defined in a somewhat complicated fashion--although the first to file has substantial advantages in any subsequent litigation. The distinction is not important for purposes of the present argument. 35 USCA[[section]] 102(g)

¹²In some cases, these forms of production may also use up a common resource--by polluting the atmosphere, say, or drawing down the water table. These situations lead to inefficiencies familiar in the literature on externalities and analogous to those discussed here for homesteading and patents.

¹³Under patent law as it actually exists, obvious inventions are not patentable. That restriction can be interpreted as designed to avoid precisely this problem. 35USCA[[section]] 103.

¹⁴In the economics literature, this phenomenon is referred to as "rent seeking." See Anne Kruger, "The Economics of the Rent Seeking Society," American Economic Review, Vol. 64 (June, 1974), pp. 291-303, and Gordon Tullock, "The Welfare Costs of Tariffs, Monopolies and Theft," Western Economics Journal, Vol. 5 (June, 1967), pp. 224-232.

¹⁵This latter point is central to the prospect theory of patent law, as developed by Edmund Kitch. See Edmund Kitch, "The Nature and Function of the Patent System," 20 JLE 265 (1977). His concern is largely with coordination in the process of producing further intellectual property. As we will see, it also provides one argument for protection of property in standards. See also Edmund Kitch, "The Law and Economics of Rights in Valuable Information," IX JLE 683 (1980) for a more general discussion.

¹⁶Economists may wish to translate the imprecise verbal argument presented here into more precise statements about the consumer and producer surplus associated with various shapes of supply and demand curves. The inefficiency due to a legal regime in which producers receive only a fraction of the value of what they produce is analogous to excess burden in the conventional analysis of taxation.

¹⁷Examples include Miniwriter, Flashwriter, and Anarcho in the Macintosh market and Galaxy, Pedit, Ravitz Editor and PCWrite in the MSDos market.

¹⁸PCWrite is the notable exception.

¹⁹Consider a public lecture by a prominent figure or a class taught by a particularly popular teacher. A reproduction, by an actor or a videotape, is a poor substitute for the original, so giving the speaker or teacher a property right in his performance will have only a small effect on the supply of such lectures and classes.

²⁰Consider the historical example of British writings in the U.S. at the beginning of this century, when they were not legally protected. Because it was necessary for a pirate publisher to reset the type in order to copy the book, a process both costly and time consuming, a legitimate publisher with access to the manuscript prior to its British publication had a significant advantage over potential pirates. With modern printing technology the pirate could produce a pirated edition rapidly and with lower fixed costs than the original publisher, free riding on the publisher's typesetting as well as the author's expression. Legal protection for printed works is consequently more important now than it was a hundred years ago. The argument applies a fortiori to computer programs, since copying costs are a much lower fraction of selling price for programs than for books.

²¹See generally Kitch (1977).

²²Another relevant factor, but one that will not be explored further here, is the availability of substitutes for legal protection, such as secrecy. If denying legal protection to a particular sort of intellectual property results in the producer substituting equally effective but more costly alternatives, that is an argument in favor of providing legal protection. See Friedman, D., Landes, W. and Posner, R., "Some Economics of Trade Secret Law," 5 Journal of Economic Perspectives 61 (Winter 1991).

²³Copyrighting a novel does reduce other writers' opportunities to copy that novel. But writing and copyrighting does not, since they could not have copied the novel if it had not been written. Thus copyright law does not give an inefficiently high incentive to write. It does give an inefficiently high incentive to copyright works that would have been written even in the absence of copyright.

²⁴See, for example, Stephen Breyer, "The Uneasy Case for Copyright: A Study of Copyright in Books, Photocopies, and Computer Programs," 84 Harv.L.Rev. 281, 292-302 (1970).

²⁵Barry W. Tyerman, "The Economic Rationale for Copyright Protection for Published Books: A Reply to Professor Breyer," 18 U.C.L.A. L. Rev. 1100 (1971).

²⁶This is not merely a possibility from science fiction. The Florida plug mold statute overthrown in Bonito Boats Inc. v. Thunder Craft Boats, Inc. (489 U.S. 141, 109 S. Ct. 971, 103 L. Ed. 2d 118) was an attempt to provide copyright-like protection against a technology for reproducing physical objects--specifically boat hulls. The Mask Act and the acts providing protection against asexual and sexual reproduction of plants are, in effect, special Federal copyright laws applied to physical objects rather than writings. A software pirate who transfers system software from one EPROM to to another is, in effect, photocopying a machine--and violating copyright law by doing so.

²⁷As mentioned earlier, one example of intellectual property for which there is almost no legal protection is the English language; the inventor of a word ordinarily has no control over its use by others. A partial exception is provided by trademark law.

²⁸Although something close to the original may be independently invented in special circumstances, such as the microcode for a CPU. See NEC Corp. v Intel Corp., No. C-84-20799-WPG, 1989 WL 67434 (N.D. Cal. Feb. 6, 1989). An intermediate case, to be discussed later, is reverse engineering driven by the need for compatibility.

²⁹The famous case is Baker v Selden, which held that the copyright on a book describing a new accounting system did not prevent others from printing forms for that system, since the protection of expression could not be used to provide a monopoly on the idea being expressed. 101 U.S. 99, 103 (1880)

³⁰ This assumption seems to pervade the recent literature. Thus, for example, Jaap H. Spoor, in an article that provides a clear discussion of the nature of standards, simply takes it for granted that being a standard, insofar as it is legally relevant, is an argument against protection. (Spoor, Jaap H., "Standardization and Exclusivity in Intellectual Property," in Information Law Towards the 21st Century, Information Law Series, Kluwer, Willem F. Korthals Altes, Egbert J. Dommering, P. Bernt Hugenholtz and Jan J.C. Kabel eds., Kluwer.). Similarly, Arthur R. Miller writes that "The third category of criticism, the 'standardization' argument, contends that the most economically and developmentally efficient use of the technology involves relaxing the copyright law in certain ways, to permit the standardization of computer programs." (Miller, Arthur R., "Copyright Protection for Computer Programs, Databases, and Computer Generated Works: Is Anything New Since CONTU?, 106 Harvard Law Review 5, pp. 978-1073, 990).

³¹Thus one could argue that the essential features of the Macintosh interface, if protectable as writings or inventions, belong to Xerox, since they were invented at Xerox PARC, but that as standards they belong to Apple, since it was the Macintosh that converted those features from an idea into a standard.

³²A frequently cited example of an inefficient standard is the Qwerty keyboard layout. It is claimed that Qwerty is much inferior to alternative standards, such as the Dvorak keyboard, and owes its dominance entirely to the accident of being first. That claim is persuasively refuted by S. J. Liebowitz and Stephen E. Margolis, "The Fable of the Keys," Journal of Law and Economics vol. XXXIII (April 1990), pp. 1-25. The authors argue that the inferiority of the Qwerty keyboard to the competing Dvorak keyboard is a myth, largely created by the inventor of the latter. Their evidence suggests that the initial adoption of the Qwerty standard took place in a market with a variety of competing standards, where Qwerty would not have won out had any of the alternatives been clearly better. Their arguments also suggest that Qwerty could not have maintained its dominant position against a clearly superior rival, since either firms employing typists or firms selling typewriters based on the new standard would have found it worth bearing the costs of conversion, and the rest of the market would have gradually followed them. It is worth noting that August Dvorak held a patent on the keyboard he designed and thus (temporary) ownership over his standard.

³³In considering the cost of producing a standard or getting one adopted, it is important to remember that standards often come embedded in goods, making the standard and the good joint products. A word processor must have a user interface and a format for saving files, whether or not they are destined to become industry standards. In deciding how much to spend on producing a better interface or format, or one more suited to be adopted as a standard, the producer under a legal regime where standards are protectable will consider both the value of producing a better product and the value of producing a better standard. If standards are not protectable, he has less incentive to design a good interface. If the fact that something is a standard (as well as a writing or invention) removes protection it would otherwise have had, the designer may even have an incentive to avoid designing an interface well adapted to become a standard.

³⁴One might argue that the failure of the English language to develop gender neutral pronouns reflects the absence of legal rules, such as property in language, to reward those who invent and popularize linguistic innovations.

³⁵Leading to the use of the term "interface police" within the Macintosh developer community.

³⁶An attempt that was made, but appears to have failed, in Apple v Microsoft.

³⁷This discussion involves two different sorts of standards. The user interface standard was presumably enforced by a policy of favoring, in various ways, software producers who adhered to it, and by Apple's policy of following it in its own software (with some notable exceptions). The machine interface standard was enforced by announcing that software that did not follow certain rules might not work with future revisions of the hardware and operating system. Control of both standards depended on Apple's monopoly of Macintosh compatible hardware. But such control could have been maintained without such a monopoly if Apple had had secure property rights in its interface. The nearest equivalent in the MSDos world was the control exercised to some degree by Microsoft, which had a near-monopoly in system software and could use copyright law to control the use and development of its system software.

³⁸This point was made by Judge Keeton in Lotus v Paperback. While the argument seems convincing, it is not clear whether it is consistent with the evidence. Two particularly striking cases are Apple's refusal (with one minor exception) to license its ROMs to other computer manufacturers and Apple's failure to license its entire interface to Microsoft. Windows 3 might have been a much better product if Microsoft had not felt constrained to avoid too much similarity to the Macintosh interface. The failure to license the interface is particularly puzzling considering that the market for MSDos compatible system software is many times larger than the market for Macintosh compatible system software, implying that there would be large gains available to be divided between the parties to such an agreement. One possible explanation is that Apple and Microsoft were concerned that such an agreement might provoke anti-trust action against them.

³⁹I have not yet made any serious attempt to investigate the status of standards elsewhere in copyright (or patent) law. One point worth noting is that the scenes a faire exception to copyright protection, although usually considered an implication of the doctrine that copyright protection of expression cannot be used to protect ideas, might instead be viewed as a doctrine designed to refuse protection to standards.

Consider the description of a southern mansion used in Gone With the Wind to represent the antebellum South. It is commonly said that copyright cannot prevent another author or film producer from using a similar scene, because it is one of a small number of ways of representing that particular idea. One might argue, however, that there are a multitude of ways in which Margaret Mitchell might have represented the idea, and it is only the fact that she chose to represent it in a particular way in a very popular novel, later made into one of the most successful movies ever produced, that established it as the standard representation. If so, the arguments used by Judge Keeton in Lotus suggest that such depictions ought to be held to violate her copyright.

⁴⁰Apple Computer, Inc., v. Franklin Computer Corporation, 714 F. 2d 1240 (3d Cir. 1983).

⁴¹Synercom Technology, Inc. v. University Computing Co., 462 F. Supp. 1003 (N.D. Tex. 1978).This case was decided before the 1980 amendments to the copyright act and at about the same time as the release of the CONTU report on which those amendments were based. Since Judge Higgenbotham treated the contested formats as material that would be protectable under copyright save for the problem of merger, it is not clear that his verdict would have been any different had the case been decided a few years later.

⁴²The case also involved a separate issue of copyright infringement due to UCC's copying of Synercom manuals. UCC lost on that issue but won on the format issue.

⁴³Lotus Development Corporation v. Paperback Software International, USDC, District of Massachusetts, 1990. 740 F. Supp. 37, Lotus Development Corporation v. Borland International Inc., Civ A. 90-11662-K, 1993 WL 325910 (D. Mass. Aug. 12, 1993); 1993 WL 325883 (D. Mass. June 30, 1993).

Whelan v Jaslow is an important case in which the judge declined to follow Judge Higgenbotham in drawing the line between idea and expression, but what was being copied in that case was not a standard but the internal structure of a program. It seems clear from the facts of the case that the reason Jaslow copied Dentalab in writing Dentcom was to save the work of redesigning the program from scratch, not to make it easier for users familiar with the earlier program to use the later. Dentcom ran on smaller and less expensive computers than Dentalab, so it was unlikely that a customer already equipped to run Dentalab would consider switching to Dentcom.

⁴⁴Borland copied only the structure of the menu tree, expressed by the initial letters used to implement commands, not its entire representation.

⁴⁵Sega Enterprises Ltd. v. Accolade, Inc., 1993 U.S. App. LEXIS 78; 93 Daily Journal DAR 304.

⁴⁶There was also a trademark issue, which is less relevant to the topic of this paper and will therefore not be discussed here.

⁴⁷Lotus presumably could not have prevailed in a suit to prevent the publisher of an instruction manual, or a textbook on interface design, or a legal casebook, from describing its menu tree, since such uses would almost certainly have been permitted under the fair use exception. It was the fact that Paperback was free riding on Lotus's efforts in making Lotus 1-2-3 an industry standard that was the basis for legal protection--the same basis that was rejected in Synercom.

⁴⁸Alternatively, one may read the case as holding that the copying was fair use because such a small amount of material was copied--although it is not clear that it was significantly less than what was copied by Borland from Lotus.

⁴⁹An earlier case, Vault Corp. v Quaid Software LTD., 847 F. 2d 255 (5th Cir. 1988), produced a similar result but justified it by a very broad interpretation of the Section 117 (1) exception to the right to forbid copying.

⁵⁰The same result is explicit in Article 1, paragraph 2 and Article 6, paragraph 1 of the Council of the European Communities Directive on the Protection of Computer Programs.

⁵¹Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225, 84 S.Ct. 784, 11 L.Ed. 2d 661, Compco Corp. v. Day-Brite Lighting, Inc., 376 U.S. 234, 84 S.Ct. 779,11 L.Ed. 2d 669, Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 94 S.Ct. 1879, 40 L.Ed. 2d 315.

⁵²This is part of the argument made by Liebowitz and Margolis for why the Qwerty standard would not have survived had it been significantly inferior to alternatives such as the Dvorak keyboard. Another argument that they offer is that the choice of the initial standard is the result of a competitive process, in which users attempt to coordinate on the most attractive of several alternative standards. In a world where legal protection is available for standards, the fact that the producer of a particular standard asserted proprietary rights to it might be a reason for users to reject it in favor of some public domain alternative. One notable example was the competition between alternative bus designs for MSDos computers, with the proprietary design that IBM implemented in some of its PS/2 models losing out to the non-proprietary alternative proposed and implemented by a group of its competitors.

⁵³This requirement appears in the form of "sufficient invention" or "flash of genius" in the old cases, and as the requirement of nonobviousness in the current law.