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5 J. Legal Analysis 1 (2013)

handle is hein.journals/jlegan5 and id is 1 raw text is: 





NOTICE FAILURE AND NOTICE EXTERNALITIES




Peter S. Menell and Michael J. Meurer'




ABSTRACT

      The emergence of intangible resources, such as intellectual property illuminates a pre-
      viously unrecognized market failure: what we call a notice externality. The incentives
      of those claiming intellectual property diverge from the social interest. Inventors and
      creators can sometimes benefit from obfuscating the scope of rights and keeping others
      in the dark about their intellectual property. This article explores the principal causes of
      notice failure in the development of intangible resources and offers a multifaceted
      framework for diagnosing, preventing, internalizing, and ameliorating its adverse effects.


1. INTRODUCTION


The institution of private property addresses a prime resource allocation con-
cern in market-based economies: appropriability (Even 2009). Property rights
encourage investment in resource development by granting property owners
rights to exclude and develop their resources, which can enhance owners' ability
to derive value from their investments. The right to exclude encourages farmers
to cultivate crops by ensuring that they, and not interlopers, will be able to reap
the harvest. It also encourages land developers to build homes knowing that
they can prevent squatters from occupying the dwellings. In these ways, the



1   Peter S. Menell, Robert L. Bridges, Professor of Law and Director, Berkeley Center for Law &
    Technology, University of California at Berkeley School of Law; Michael J. Meurer, Abraham and
    Lillian Benton Scholar and Professor of Law, Boston University School of Law, E mail: pmenell@
    law.berkeley.edu. We thank participants at workshops at the Swiss Federal Institute of Technology
    Zurich (ETH), Harvard Law School, Boston University School of Law, Stanford Law School, UC
    Berkeley School of Law, Northwestern University's Searle Roundtable on the Law and Economics of
    Digital Markets, Works in Progress Intellectual Property (WIPIP) conference, and Intellectual
    Property Scholars Conference (IPSC) for comments on earlier presentations of this research. We
    also thank Jonas Anderson, Scott Baker, Robert Barr, Bobby Bartlett, Eric Biber, Steve Carlson, Dick
    Craswell, Marcus Cole, Peter DiCola, David Friedman, Mark Gergen, Paul Goldstein, Shuba Ghosh,
    Wendy Gordon, Shane Greenstein, Ward Hansen, Mark Kelman, Prasad Krishnamurthy, Mark
    Lemley, Rob Merges, Barbara van Schewick, Steve Shavell, Henry Smith, George Triantis, Molly
    Van Houweling, and Spencer Weber Waller for helpful discussions and comments. We thank
    Damion Jurrens and Jason Lau for research assistance. Meurer gratefully acknowledges funding
    from the Marion Ewing Kauffman Foundation.
© The Author 2013. Published by Oxford University Press on behalf of The John M. Olin Center for Law, Economics and Business
at Harvard Law School.
This is an Open Access article distributed under the terms of the Creative Commons Attribution Non-Commercial License
(http://creativecommons.org/licenses/by-nc/3.0/), which permits unrestricted non-commercial use, distribution, and
reproduction in any medium, provided the original work is properly cited.
doi:10.1093/jla/las019                                  Advance Access published on January 3, 2013

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