Notice Failure and Notice Externalities

Abstract

The emergence of intangible resources, such as intellectual property illuminates a previously 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.