As budding lawyers or law students, we tend to focus on how certain laws work or the challenges that they present rather than why they are there to start with. After all, it’s lawyers’ job to interpret and advise on the law, not to make it. However, understanding why an area of law exists may be useful when trying to determine why it might be important to a client. In particular, trying to understand why particular areas of law are important to businesses could help you to develop your commercial awareness.
Take IP law for example. If you’ve studied it at all, you’ll know that, under UK law, there are four types of intellectual property:
But have you ever stopped to think about why the government doesn’t just allow businesses to use each other’s ideas and branding? After all, one might think that the economy would grow faster if businesses could piggyback off each other’s ideas. There might even be humanitarian reasons not to issue patents, as they often make medicines more expensive.
To understand why IP law exists, we need some simple economics. Imagine a person, Bob, who thinks he might be able to extract a new antibiotic from mushrooms. The R&D process would be expensive and might not lead to the results Bob hopes for. However, since mushrooms are readily available, if he does manage to develop an antibiotic from them, that antibiotic will be cheap to produce. If patents didn’t exist, Bob (or his company) would end up spending huge amounts of money developing the extraction process only for other companies to produce the new antibiotic just as cheaply and earn similar revenues from selling it. This would give Bob an incentive to wait for another company to do the research first so that he could enjoy the benefits of selling the new antibiotic without going to the trouble and expense of developing it. Since the same incentive not to engage in research and development would also apply to all other potential researchers, the new antibiotic would never actually be made. By contrast, if patents existed, Bob would know that figuring out how to produce a new antibiotic would allow his company to be the only one to sell it for a certain number of years. During this period, he could sell the new antibiotic in greater quantities and at higher prices than if patents didn’t exist because of the lack of competition Therefore, the incentive for Bob to work on the new antibiotic would be much greater. In other words, patents exist because they provide an incentive for innovation.
A very similar argument applies to other types of intellectual property, especially copyright and trade secrets. If anyone could put their name to someone else’s work, why would anyone go to the effort of producing new work? Instead, parties could put their name to someone else’s work, which would allow them to receive all of the same benefits without incurring any of the costs. Further, if any company could copy another company’s production methods, spending money developing new production methods wouldn’t lead to any competitive advantage and would thus be a waste of money.