Economic Analysis of Network Effects and Intellectual Property

Abstract

The information revolution has brought demand-side effects to the fore of economic activity, business strategy, and intellectual property jurisprudence and policy. Intellectual property doctrines play a central role in harnessing network effects, promoting innovation to overcome excess inertia, and balancing consumer welfare, competition, and innovation. This chapter surveys and integrates the economic, business strategy, and legal literatures relating to network effects and intellectual property. Part I introduces the topic of network effects and provides an overview of this Chapter. Part II describes the functioning of network markets. Part III examines the interplay of business strategy, contract, standard setting organizations, intellectual property, and competition policy. Part IV presents three principles for tailoring intellectual property regimes and competition policy for network technologies. Part V traces the evolution of intellectual property protection for network features of systems and platforms. Part VI discusses the interplay of intellectual property protection and competition policy. Part VII assesses the extent to which intellectual property protection and competition policy align with the normative design principles. Part VIII identifies promising areas for future research.