Searle, N., & Brassell, M. (2016). Economics of Innovation.
In Economic Approaches to
Intellectual Property (1st ed., pp. 29–39). Oxford University Press.
2
ECONOMICS OF
INTELLECTUAL PROPERTY
This chapter presents rhe economics of intellectual property rights (IP righrs), 2.01
examining their rationales, evidence, and use. The chapter begins with a dis-
cussion on rhe broader theories of rhe economics of IP rights and innovation.
111is should give the reader an improved understanding of the economics of these
rights and their practical uses, and insights i nro the thinking behind IP policy
measures.
111e fact that IP rights are legal and separable aids their usefulness, because ic ena- 2.02
bles them to operate like other forms of property rights, including their suitability
for being uansferred by way of assignment or licence. However they are vastly
more mobile than most other types of property asset, and more likely ro appreciate
in value over chei r lifespan if they are appropriately managed and commercialized.
For this reason l P rights are sometimes called, 'the currency of rhe knowledge
,
economy.
Economic Theories ofIP
In rhis section, we look at the philosophical underpinnings of the economics ofIP 2.03
rights and the principles that dictate economic debates over them. "The justifications
for IP rights have a long history and one chat has considered rhe ethical approaches
discussed in the previous chapter. There are three main schools of thought in the
economic justification for IP rights: these are incentives ro innovate, labour desert
theory; and the rejection ofIP rights.
In economics, the incenrive to innovate is the primary justification for the creation 2.04
of! P laws. The creation of any monopoly in economics is typically considered an
anathema because monopolies create markers with higher prices and lower quanti-
ties, and in doing so, they reduce social welfare because the reduction in consumer
surplus does not correspond ro an equal increase in producer surplus. A rypical
29
Economics offP
monopoly is, therefore, inefficient. Thus, economics would expect further justifica-
tion for the creation of an IP monopoly. This justification is perhaps besr expressed
in social contract theory, which frames TP rights as a form of contract between so-
ciety and innovators.
2.05 In social contract theory, the temporary monopoly granted by f P righrs is tolerated
in exchange for the longer-term interest ofsusrained innovation. An IP right repre-
sents an agreement, a social contract, between society and innovators. In the shorr
term, the monopoly created by IP rights comes ar rhe cost of consumers rhrough the
higher prices and lower quantities of rhe protected innovation. The innovaror uses
the monopoly ro recoup rhe costs and risks associated with the development of rhe
IP for which rights have been granted, and appropriate the rewards of their innov-
ation. In the long term, the monopoly expires; the protected innovation becomes
part of the public domain; and consumers and subsequent innovators benefit from
the availabiliry of the innovation, Innovation also improves productivity, stimu-
lates investment, and facilitates growth, which contribute to wider, macroeconomic
benefits. Innovators continue to innovate and society, as a whole, benefits from
the incentives created by [P rights. This principle is further developed later in the
chapter.
2.06 A second school of thought frames IP as a natural or intrinsic right whereby an
innovator should automatically own the innovation. This can be expressed via la-
bour desert theory, also known as rhe labour theory of property, labour theory of
ownership, or principle of first appropriation. In this theory, it is assumed that an
individual (in this case the innovator) owns their labour and consequently owns the
fruits of their labour.' For example, the person who plants the tree owns the apple.
The seventeenth-century philosopher John Locke was a proponent of this argu-
ment. However, as IP is intangible, as opposed to tangible, property, special rights
ro protect IP must be created. Ir is relatively easy to protect an individual apple, bur
less easy to protect a method ro improve apple yields. Thus, the natural right of own-
ership over innovation requires IP rights.
2.07 Many of the recent policy debates surrounding IP can be plotted on an axis stretch-
ing between the incentive to innovate and natural right approaches. IflP is a nat-
ural right, then strengthening IP rights to protect the owners of, for example.
music, is a positive ching. However, if IP is an incentive to innovate, then strength-
ening existing rights at the expense of consumers or other innovators is a negative
step. Striking the balance between these two poles is an ongoing challenge in IP
systems.
1
"ll1 is approach can be extended to consider moral rights, which a re addressed in the section on
copyright.
30
Economic 1heories ofIP
A rhird school of thought differs dramatically. This school of thoughr views IP 2.08
rights as an obstacle to the free flow of information and even as theft. A common
objection is the framingoflP as a properry righr and char this framing creates undue
restrictions on the use of the protected knowledge. Given its intangible nature, IP
lacks two main characteristics of property: scarcity and rivalry. Scarcity is the con-
dition in which unlimited demands are placed on limited resources. This is easy to
see in the case of physical goods such as clean water, in which quantities are rela-
tively fixed, bur less so in the case of intangible goods like song lyrics or a formula
as the quantity cap can be easily increased (copies). Rivalry2 is a second condition
often associated wirh physical goods in that the consumption by one altects the
consumption of another". However, my consumption of the song lyrics does not
affect your consumption, whereas my consumption of clean water does. Again, chis
is difficulr to apply to the ideas and expressions of ideas often protected by IP rights.
Based on these and related arguments, there is a growing movement of thought
against the legal protection associated with IP.
Throughout this book, these approaches will be explored in an effort ro understand 2.09
whether it is possible w strike an optimal balance in rhe case ofIP. In essence, the
goal of economics is co have an IP system chat supports a healthy innovation sys rem.
However, this is much easier said than done as problems arise due co technological
disruption (consider the effect of the internet and digitization on long-sranding
copyright models), moral concerns (the importance of moral rights), humanitarian
concerns (e.g. pharmaceutical innovation), and strategic use of the sysrem (often by
non-practising entities).
Firche (1793) encapsulates these various arguments in his description of the defence 2.10
ofan alleged infringer ofa patented medicine.
I like to proceed in a principled way. As everyone knows, the only rrue measure
of rhe excellence of our actions is their utility. The more widespread and signifi-
cant the benefits of an action, the more virtuous that action is .... Bur is it really
necessary to show rhac my actions have [he most beneficial of consequences for
the public? I sell the nostrum much more cheaply than die plaintiff; the lowli-
est man can thus afford ro procure it, unlike ar the high price demanded by the
monopolist. ... What a service ro humanity! Could I bur painr a vivid picture for
Your Majesty of the groans of the suffering, the rattling ch roars of the dying, who
have been saved by the physic they bought from me! ... Just calculate all the work
which everyone whose life has been extended by several years through this m iracle
2
Rivalry is not found in all physical goods as, for example, in public goods. Public goods are
non-cxcludable (individuals can nor be excluded from consuming the good) and non-rivalrous (con-
sumption by one docs nor a ffccr consumption by another.)
3 IP is sometimes cast as a 'club good' in chat it differs from public goods as it is excludable bur
non-rival rous.
31
Economics ofIP
medicine can perform for the culture of the land in rhese years; just imagine rhe
even greater culture that will thereby become possible, and so on ad infinitum ....
figure the total growth ofhumaniry and culture which results from all of chis and
which would have been absolutely impossible had I nm stolen chose miraculous
drops from the plaintiff.4
2.11 With the rising profile oflP generally, the tensions between competing schools of
thought on IP rights may increase. While economists (particularly rnicroecono-
mists) tend to cluster on the innovation/social contract end of the specuum, the
relative lack of economic evidence and analysis oflP rights, compared w the wealth
of analysis of rnngible propeny rights, provokes anxiery5 amongst economises. IP, as
an innovation-relatedareaofpolicyand a system with important economic implica-
tions, warrants furcher investigation, and so each of these three principal theoretical
approaches will be examined in rum.
Social contract theory
2.12 Social contract theory is the predominant theoretical approach to IP rights as an
insrrumenr to encourage innovation. The social contract is a philosophical and
political approach to the relationships between individuals and societies. It argues
that individuals will voluntarily surrender rights and freedoms in exchange for pro-
recrion and preservation from society/governments. This exchange is the contract.
Applying social contract theory to IP rights frames IP systems as a contract between
innovators (the individuals) and society.
2.13 There are rwo key players in rhe social contract theory: the innovator and society.
Innovators are those char create, invent, and innovate. They spend resources to cre-
ate their output of innovation. Society is everyone else (although generally consid-
ered to be consumers). Society is interested in innovation as ir leads to better and/
or cheaper products and services. Innovators incur costs m innovate from which
society benefits.
2.14 ln an ideal system, the costs associared wirh each innovation would be perfectly
offset by the benefits of each innovation. 1hac is, society would reward (pay)
4
Fitche, J. (1793). 'Proof of the 111egality of Reprinting: A Rationale and a Parable' as trans-
lated by Martha Woodmansee. Available at: hrtp://www.case.eclu/affil/sce/authorship/Fichte,_
Proof.doc
5 'Ihe reactions of economists when they first confront IP can be rather amusing. This ranges
from shock that such a wide-arching policy can exist with so little evidence, ro confusion as to why
society actively creates these legal monopolies. In a meeting the author of this chapter attended, a
well-known economist, new co IP, expressed perplexity at the government's interference in private
conrracrs where IP is concerned. The same does noc happen in other private contracts. He then com-
pared the enforcement of copyright ro the cquivalenr of using a steamroller over consumers' rights
ro rhc hcndir of copyright owners. The poinr is rhar IP, primafacie, does not con Form to standard
eco110111ic theory.
32
Economic Theories of1 P
.n novators exactly the value of the innovation which would generate an appropriate
.eve] of return on their invesrrnenr. In practice, this is nigh-on impossible. Instead,
what exists is a compromise or second-best" solution in rhe form of rhe lP regime.
The cosrs associared with each innovation are borne by the innovator. The in nov- 2.15
aror incurs these costs in the hopes of being rewarded wirh appropriate benefits.
For example, in the successful development of new song lyrics, a writer will have
invested rheir skills (obtained through time and education) and a variety of other
costs. These are the sunk costs associated with the innovation. However, once ere-
ared, the innovation of the lyrics can be copied very cheaply. As discussed earlier, in
efficient markers, the price ofa good falls to its marginal cost. Therefore, the price of
rhe song lyrics will eventually fall to nearly zero-the cosc of making a photocopy
or additional electronic copy.
Given the relatively high costs of developing an innovation compared to the price 2.16
commanded by the market, without IP rights, the innovator will struggle to recoup
their costs. In chis case, the expected value of innovating becomes zero.1l1e intan-
gible quality of knowledge means that it is difficult co prevent others from making
use of it, In this sense, knowledge is often referred to as a public good. Public goods
are goods chat are non-rival rous and are non-excludable.7 IP roughly fits this de-
scription as, to a degree, one person's consumption of the knowledge does not affect
rhe consumption of another (non-rival). IP is also non-cxcludable as it is difficult
ro prevent others from consuming knowledge. In rhis context, IP rights serve as a
means ro construct protective barriers around knowledge by creating a propercy
right with the aim of preventing copying.
The property right created by an IP right creates a legal monopoly for the innov- 2.17
acion. This may translate into a market monopoly in which the innovator is able co
achieve monopoly profits, as discussed in the introductory chapter. The monopoly
profits, in theory, allow the innovator to appropriate the returns from their invest-
ment in innovation as the legal monopoly protects the innovator from having to
compete against copies. This satisfies the innovator's preference for profits.
However, this monopoly implies higher prices and lower quantities for society, 2.18
Society knowingly grams innovators such rights because the conrracr exists in two
time periods. The tirsr rime period is short-term in which che monopoly situation
exists as described above. It is a static period and essentially presents a snapshot of
6 In some economic situations, the optimal solution cannot be reached, as ir would decrease
overall efficiency. In chis case, the practical costs of calculating the value of each innovation and
rewarding the innovator would outweigh rhc benefits of appropriately distributed rewards. instead,
what exists is called a second best solution, which is the feasible, efficienr solurion.
7
Other examples of public goods range from clean air and attractive views to lighthouses and
national defence.
33
Economics ofIP
the innovation. The innovator recoups their investment and society accepts the
higher prices and lower quantities.
2.19 The second period is long-term in which society's goal of continued invesrrnenr in
innovation becomes realizable. Instead of focusing on a snapshot, the long-term
looks at the dynamic, ongoing environment in which rhe formerly legally protected
IP can encourage repeated innovation. If the short-term bargain was to fail, and an
innovator did nor recoup his or her initial investment, then innovators would cease
to have rhe funds and incentives to innovate. Thus, society is willing to accept the
relatively disadvantageous conditions of the short term in order to have the long-
term advantages.
2.20 However, the bargain does nor end there. J nnova don is cumulative in the sense that
one innovation nearly always builds on another. For continued innovation to hap-
pen, previous innovation must be freely available. Thus, rights expire. Society grants
innovators these legal monopolies on the condition that there are limited, made
public (disclosed), and eventually fall into the public domain. The social contract
creates condlrions in which knowledge is shared and innovators have continued
incentives to innovate.
2.21 A third player in this theory is government, which acts as an intermediary between
innovators and society. Governments are motivated by rhe demands of innova-
tors and society, and by a wider goal8 of economic growth through innovation.
Government sets the policy and provides a number of key services, such as registra-
tions and court systems, as enablers ofa functioning IP system.
2.22 In brief, the short-term, static inefficiency of the remporary monopoly is granted in
exchange for the long-term, dynamic innovation that it incencivizes. Clearly, rhis is
a difficult balance to strike. Ir rhe temporary monopoly is roo strong, society pays
too much and/or other innovators are unable to build on the innovation. If the tem-
porary monopoly is too weak, then innovators may not recoup their investments
and may cease ro innovate.
2.23 Social contract theory presents a neat framework for interpreting IP. However,
various assumptions associated with the theory are nor necessarily evident in prac-
tice. For example, innovation certainly occurred before the advent of IP rights,
and profits and continued innovation are apparent in areas wirh relatively weak
IP rights protection (such as the fashion industry). In the creative industries, crea-
tors are often intrinsically motivated with little regard for JP. Numerous stud-
ies have suggested that many in nova rive businesses view marketing, timing, and
8
The theory docs nor require that governments be motivated by a desire for economic growth,
but this motivation is often the case.
34
Economic Theories ofIP
other strategies as relatively more important than obtaining IP rights. There is also
growing concern that this social contract is now tilted in favour of existing inno-
vators, rather than innovation. These themes will be explored further throughour
this book.
Interaction with other theories
In contrast ro the innovation-based, social-contract theory of lP, there is the labour 2.24
desert theory. Individuals are assumed to own their own labour and, therefore, own
the fruits of their labour. Consequently, innovators have intrinsic ownership of the
fruits of their efforts-the innovation . .Having ownership via IP righrs provides an
incenrive to continue these efforts. However, it fails to fully account for the wider
societal interest in innovation. If innovations are owned by their creators, full stop,
how does cumulative innovation occur? This also becomes a problem for creators
as, in the process of innovating, they may need to use other people's innovations,
Labour desert theory struggles to balance the interests of the one-off: individual
i nnovacion with the wider innovation and societal environ menr.
However, an in novar ion approach, prima facie, is less able to deal with non- 2.25
i nnovarion concerns associated with IP. A good example of chis is provided by moral
rights in the realm of copyright. Moral rights, unique to copyright, go beyond the
trad irional concept of ownership of property. Moral rights include the right to at-
tribution or anonymity, the righr not co have work falsely arrribured, and rights to
safeguard the inregricy of the work. Labour desert theory can easily include moral
rights as they are compatible with the intrinsic rights stemming from ownership
over the fruits of one's labour. Yet moral rights are likely very important innovation
motivators for creators ofcopyrighred content; a lack of control over creative outpm
would be a disincentive to creativity and innovation. Therefore, moral rights can
also be considered an incentive ro innovate and one that firs with social contract
t hcory, Other concerns, addressed in subsequent chapters, are challenges associated
with human rights (pharmaceuticals), traditional knowledge, and the limits of the
public domain .
..\ third cluster of theories ofJP, and one that is still developing, is the concept that 2.26
the limitations IP rights impose on the flow of information and knowledge does
nor solve challenges to continued innovation, as discussed earlier. Instead, know-
:edge should be more freely shared. This free sharing of knowledge ranges from
:he complete rejection of IP rights altogether to the concept of open innovation,
: n which innovators collaborate and information flows more freely. The anarchist
·. icw of 'properry as theft' has also reached the realm ofIP and consumer arrirudes
~0 IP righrs have changed with the advent of the internee. There are also business
models based on open innovation, free software, creative commons, and concepts
_,.f free cul cure.
35
Economics ofIP
2.27 Indeed, this third nexus of approaches to innovation and knowledge is a very het-
erogeneous set of theories. 9 Ir should be noted that open innovation or 'knowledge-
is-free' is not inherently in opposition with IP. IP can serve as an important enabler
for collaboration by defining collaborators' foreground knowledge at the start of r he
co-creation process.
2.28 In summary, viewing IP rights primarily as incentives to innovate is only one of
many ways t0 consider its role. Ir is, however, rhe predominant economic approach
to IP and will likely remain so given the conrinuing focus of national economic
policy on innovation and growth. Accordingly, the following section uses rhe in-
novarion framework to structure an analysis of IP rights and highlight debates,
weaknesses and strengths oflP systems.
IP laws as innovation policy
2.29 Despite growing interest in and awareness of IP, as demonstrated (for example)
in the increasing numbers of registered rights, there is plenty of evidence ro sug-
gest chat it is easy to overestimate the role ofIP rights in stimulating innovation
and achieving business success. Numerous studies have suggested that IP is nor
the preferred means for innovators to recoup their investment: a study by Cohen,
Nelson & Walsh (2000), for example, notes rhar marker strategies such as brand-
ing, access to markers, and economies of scale are preferred. In research on busi-
ness models (Searle, 2011), creative businesses did nor cite IP rights as a primary
concern. Given that IP is only one aspect of a complex set of economic measures
within a wider policy environment, the nature of innovation itself provides other
means to create profits. The nexr section will examine the economics of innov-
ation further.
Economics of Innovation
2.30 As noted earlier, ir is in the interest of society to encourage innovation because ir
enables members of society to have better healthcare, enjoy new media, do things
better and at lower costs, and benefit from new technologies. Innovation allows
people to do more with existing resources or do the same using fewer resources. Ir's
all very exciting. Innovation is popular politically as it is a way to grow an economy
without necessarily increasing consumption of natural resources and may provide a
comparative advantage against other nations. This makes encouraging innovation
an imporrant componem of economic policy.
9 The nuances of open innovation are outside the scope oF this book. For more, see the works
of Henry Chesbrough, the main theorist for open innovation, in particular his 2003 book, Open
Innovation: The New Imperative for Creating and Profiting from Technology (Harvard Busi ncss
School Press, Boston, MA).
36
Economics ofInnovation
There are various concepts of innovation, but one that is particularly prominent 2.31
is chat of Schurnpeter (1934, 1939). In economics, an innovation is an applied
invention. Schurnperer posits a theory of 'creative destruction', in which in nov-
arion occurs through the destruction of the scams quo. This implies that creativity
leading to a new technology may necessarily be highly disruptive, because such
innovation comes at the cost of existing models. Ocher theories focus less on the
destruction of the status quo and more on the creative elements: Kirzner (1979)
for example, focuses more on the role of innovators discovering opportunities
for gain.
A long-standing and continuing example of creative destruction and techno- 2.32
logical disruption is provided by the internet and its imp act on the music industry.
The music that began as live performance of compositions has been partially
replaced by recorded music, which has itself evolved from wax discs on gramo-
phones via vinyl records and cassette tapes to compacr discs and DVDs. This
continued development of technology has long challenged the music industry's
business models, though unril recently, it was at lease sr ill able to control the
higher quality physical formats, enabling some market structures to be retained.
Recently, this has been revolutionized by rhe internet, allowing new lorrnars, new
process, and reduced distribution costs for music. Whilst this has been highly
disruptive to the existing industry, it has delivered substantial opportunities for
new entrants to the market, such as Apple, who have able to gain large marker
shares in a short period.
In novario ns are broadly divided into two types: process and product innovation. 2.33
Product innovations work towards introducing new products (automatic trans-
mission, for example, created cars that were easier to drive), while process in-
novation is generally directed cowards reducing the costs of production.'? For
example, the American industrialist Henry Ford reduced the costs of manu-
facturing cars by introducing the assembly line; instead of one or two workers
building an entire car, each worker specialized in one area, and the cost per
car fell.
111e system of innovation is also very important. Basic models of innovation 2.34
presenr a linear model rhar begins with basic research and invention that is then
developed into an innovation and finally is launched to r he marker. This can be
a 'push' or 'pull' model in which innovators either inrroduce innovation and
generate demand (push) or innovate to fill existing demand (pull). More com-
plex models acknowledge that innovation is rarely linear and instead is a messy,
iterative process.
10
Economic models often use process innovations, as a decrease in costs is relatively easy
ro model.
37
Economics ofIP
2.35 A classic model of innovation in economics is char of rhe innovation race. In
this race, competitors seek ro innovate first as success means monopoly profits.
According to Shy (1995), there are a number of scenarios of innovation races
based on the relative costs of innovation, the probability of success, and the
expected payoffs (profits and innovation). If too many firms engage in costly in-
novation with a low probability of success, then duplicare efforts are wasted. lf
the probability of successful innovation is very low, then no firms may engage in
innovation (this is one argument cited in discussions on antibiotic development;
see Chapter 3 on parents). If innovation is relatively cheap, then the duplication of
efforts may nor be wasteful. To avoid potencial waste, models of cooperation and
licensing may be practical.
2.36 However, those who innovate first are not necessarily chose who reap the largest
rewards from their creativity. There also exists the 'second mover advantage' in
which competitors are able to learn from rhe mistakes or setbacks experienced by
first movers and overtake them. An example of this is the Apple iPod, introduced in
2001, some years afrer the firsr MP3 player entered rhe marker. Apple developed a
product char was more user-friendly, compacr, arrracrive, and aspirational than its
predecessors and was able to caprure rhe marker quickly.
2.37 A similar phenomenon, known as leapfrogging, occurs at a counrry level where
developing countries skip ahead in innovative products and services. This can occur
because a country may invest in wider intervals, skipping incerim technologies,
rather than continually investing. An ofr-cired example of this is telephone tech-
nology, where counrries may go from having limited access to land telephone lines
to a much broader distribution of mobile telephones.
2.38 The practice of licensing, discussed in following chapters, is very important for
the diffusion 11 of information and innovation. le allows for continued innovation
and can also create value for existing innovations. For example, the song 'A Little
Less Conversation,' performed by Elvis Presley in 1968, was remixed and became
a chart-topper in 2003. The remix, licensed from the original, revived a creative
piece that had otherwise limited value to consumers at the time. The creators of
the remix also benefited from rhe ability co use the modified work commercially
via 1 icensi ng.
2.39 The role of governments in subsidizing research and development (R&D) is also a
key component of innovation. Popular in novations chat began as military tech nolo-
gies include computers and microwaves. Government funding ofR&D ranges from
11 In some cases, compulsory licensing may be used. Compulsory licensing, insrigared by gov-
ern mcnr , obligates a rights holder to licensing rheir innovation. 'Ihis may occur in instance ofsocial
health needs (pharmaceuticals) or for practical reasons (some aspects of copyright).
38
Economics ofTnnovaiion
tax breaks, direct subsidies, higher education funding, and government research
itself. Public and charitable funding also helps co support an innovative climate for
the creative and cultural industries. The impact of government funding of R&D
has hugely conrribured ro advances in medicine, the iPhone, and a host of other
innovations (Mazzucaro, 2014).
The government may also intervene in innovation when the market is unable to pro- 2.40
vide sufficient incentives. Mazzucato also argues char the private sector only enters
into R&D areas once the government has already undertaken the high-risk invest-
ments. In IP, the parent box, a tax break on profits associated with patencs, is a form
ofgovernmenc subsidy for R&D, discussed in more derail in Chapter 9.
Of course, whilst being perceived by governments as a societal benefit, innovation 2.41
is nor universally welcomed by society, as is illustrated by the story of the Luddites.
In the early 1800s, faced with the mechanization of their jobs, some English tex-
tile workers rook to destroying the offending machinery. The term 'Luddite' is now
emblematic of a reluctance to embrace, or ro actively oppose, progress in rhe form
of new technologies and poinrs to a different aspect of innovation which economic
constructs of l P rights fall victim w non-economic social and psychological pres-
sures. This theme is nicely captured in a quote from che novel Player Piano, a dys-
topian view of an entirely mechanized future:
'Of course you're right. It's just a hell of a rime to be alive, is all-c-just chis god-
damn messy business of people having co gcr used LO new ideas, And people just
don't, that's all. I wish rhis were a hundred years from now, with everybody used
co the change.'
- Kurt Vonnegut (1952), Player Piano
Luddites aside, innovation is generally considered beneficial for society. However, 2.42
interpretations and justifications for IP systems surrounding innovation vary sig-
nificantly. Innovation itself is a messy process and one that does not always have
clear outputs.
Economic analysis and IP policy
Evidence-basedpolicy
Economic analysis ofIP rights informs IP policy. Analysis provides evidence 12 and 2.43
scrutiny co suggest policy changes and measure the impact ofIP rights. Policy, and
the policy-making process, is a convoluted drama in which economics plays only
12 le is important to note that evidence in economics and policy is different from the evidence
used in legal disputes. Evidence in economics is fairly broad and includes examples, argumenrs and
data supporting a particular view. The legal underst,tnding of what constirurcs evidence is much
narrower and more specific.
39
