Legal Structure, Strategic Regulation and Dividing the Spoils from R&D in Intellectual Property

In this paper we examine the often neglected role of the nexus between law and economics in the context of assessing regulatory efficiency. Through some fairly straightforward conceptual exposition and an empirical analysis of the regulation of intellectual property in the USA, we demonstrate the ease in which legal nuances can deviate well motivated copyright and antitrust laws from their objective of optimising market performance. In particular, the paper illustrates the manner in which legal structure creates scope for the strategic manipulation of copyright and antitrust laws by various interest groups. It may also motivate international regulatory conflicts and races. This occurs when national regulators pursue a 'robbing Peter to pay Paul' approach to regulation, which seeks to minimise the price paid by domestic users of intellectual property, at the cost of increasing the price paid in foreign markets. This tendency is exacerbated if legal-access/litigation costs fall. The analysis, therefore, adds a further argument to the growing case for international regulatory co-operation in competition policy, as well as the need for a greater input by economists to legal design.