Intellectual Property: General Theories
131writings’. (H.R. Rep. No. 2222, 60th Cong., 2nd Sess. 7, 1909. See also
Mazer v. Stein
, 347 U.S. 201, 219, 1954; MMLJ, 1997, pp. 326-328).
2. Historical Background
Utilitarian theories of intellectual property developed and evolved in asymbiotic relationship with the evolution of the modern state: from theformation and maturation of the mercantilist nation-states through theIndustrial Revolution to the rise of the modern capitalist economy. Mostearly scholars focused upon what Merges (1995b) calls the ‘GrandQuestion’: whether state-created intellectual property rights should exist atall. More recently, attention has shifted toward the design of intellectualproperty rules and institutions.Intellectual property rights emerged during the early mercantilist periodas a means for nation-states to unify and increase their power and wealththrough the development of manufactures and the establishment of foreigntrading monopolies. The term patent, derived from the Latin
(to beopen), refers to an open letter of privilege from the government to practicean art (MMLJ, 1997, p. 122). The Venetian Senate enacted the first patentstatute in 1474 providing the maker of any ‘new and ingenious device ...reduced to perfection so that it can be used and operated’ an exclusivelicense of 10 years to practice the invention. Other nations followed suit andthe granting of limited monopolies for inventions, and later to publishersand authors of literary works, became the dominant means of promotinginnovation and literature (Hadfield, 1992; Merges, 1995b;
MMLJ, 1997).The philosophy of intellectual property developed in response to the use of monopoly power to spur innovation. Adam Smith (1776, pp. 277-278),while generally critical of monopoly power as detrimental to the operation of the ‘invisible hand’, nonetheless justified the need for limited monopolies topromote innovation and commerce requiring substantial up-frontinvestments and risk. Jeremy Bentham (1839, p. 71) went beyond this justification for intellectual property rights, providing a clear explication of the differential fixed costs borne by innovators and imitators:
[T]hat which one man has invented, all the world can imitate. Without theassistance of the laws, the inventor would almost always be driven out of themarket by his rival, who finding himself, without any expense, in possession of adiscovery which has cost the inventor much time and expense, would be able todeprive him of all his deserved advantages, by selling at a lower price.