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Willie Morales
Professor Jepsen
Law and Economics
Graduate Paper
Intellectual Property and Fine Arts
Introduction
This paper will look at the relationship between the fine arts and intellectual property (IP) laws.
Economic theory will be used to analyze the bundle oflaws that make up IP laws; Copyrights, Patents, and
Trademarks. I will trace the historical developmentofIP laws and demonstrate how they were catalyzed by
the United States’ economic interests. This paper will also touch upon the developmentof Moral rights laws
that led to the developmentof Visual Artists Rights Act of 1990 (VARA) in comparison to traditional IP laws.
A discussion ofthe broadening in scope ofIP laws as they pertain to Australia’s Aboriginal art cultures will
illuminate the risks associated to abusing IP laws. This paper will address the optimal structure of IP laws
so as to bestfoster creativity amongstartistic populations. The lastsection ofthis paper will address the real
world occurrences ofart crimes and how not only IP laws, but the criminal and civil laws are addressing art
criminality.
History of Intellectual Property
Arguably the mostimportant copy rightconvention in the history of IP on the international scale took
place in 1886 in Berne Switzerland. The U.S. did notinitially have sufficienteconomic incentive to participate
in the Berne convention. The founding father’s legacy which wanted to part ways with the traditions of the
old world did notfundamentally believe ingranting artists moralrights which was a standard ofthe convention.
When the way the nation did business changed froman import to an exporteconomy, U.S. revenues became
susceptible to piracy costing the U.S. great economic losses. This change in the export/importstructure for
the U.S. economy led to U.S. participation in the Berne convention more than a hundred years later in 1990.
This meant that the U.S. would have to adhere to the Berne convention’s moral rights clause, leading to the
creation of the Visual Artists Rights Act of 1990 (VARA) (Tang, 2012).

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An Economic Analysis of Intellectual Property Laws
IP law confronts an innovation-dissemination tradeoff via patents, copyrights, and trademarks. IP
law developed without the consultation ofscientific theory. Only recently has IP law come under the formal
analysis ofa scientific methodology through economics. Cooter and Ulen (2012) state that economics is not
a sufficient avenue by which to evaluate IP law. Because economics evaluates changes to variables using
static equilibrium analysis, the changes and innovations of IP law are a violation to said fixed equilibrium
models (Cooter and Ulen, 2012). Economics is further limited in its expression of IP functions because
legislators respond to powerful political groups and lobbyists. Thus, IP’s potential to be analyzed using
economics is diminished in terms of economic efficiency (Cooter and Ulen, 2012). That said, even if
economic analysis will fail to completely express the dynamics ofIP law, it can still provide a more concise
understanding.
“Article I, section 8 of the U.S. constitution gives Congress the power to promote the progress of
science and useful arts, by securing for limited time to authors and inventors the exclusive right to their
respective writings and discoveries” (Cooter and Ulen 2012, 118). From an economic perspective patents
and copyrights are monopolies granted to inventors/creators, “The successful applicantnow receives a 20-
year monopoly…No one can use the invention exceptwith owner’s consent…Others…must purchase the
right to do so from the patent holder…for the licensee’s paymentofa fee known as a royalty” (Cooter and
Ulen 2012, 119). This monopoly is protectedby the duration and breadth ofthe copyrightor patent. Duration
refers to the number ofyears between a copyrightor patent’s registration and its expiration whereas breadth
refers to how similar another invention can be without infringing on the copyrights or patent of the original
invention (Cooter and Ulen, 2012). Broadly defined copyrights and patents grantan inventor exclusive rights
over an invention and its derivatives securing all profits for the inventor. Broad patents encourage fast
duplicative research whereas narrowly defined patents require separate patents for subsequently related
inventions. Narrow patents encourage slower complementary research (Cooter and Ulen, 2012).

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There are instances where a pioneering invention does notyield a marketvalue until an application
ofthe inventionis broughtto marketby another inventor’s patent. In these cases the law binds bothinventor’s
patents together, almost forcing them into a Normative Coase (NC) and Normative Hobbes (NH) Theorem
arrangement requiring them to bargain and agree with each other before deriving any profits from either
patent. From an economic perspective deciding on whether or not a copyrightor patentshould be broad or
narrow would be a function of whether society values investments in research or investmentin development
more highly. The law instead relies on the doctrine ofequivalents which refers to how nearly equivalenttwo
inventions must be before finding patent infringement (Cooter and Ulen, 2012). The law has departed from
the teachings of efficiency, “Courts have sometimes reasoned that an improvementwith great commercial
value should not be interpreted as infringing on a pioneering invention with little stand-alone value” (Cooter
and Ulen 2012, 121). This legal practice provides inefficientincentives to pioneering inventors. According
to economist-lawyer Howard Chang, without the pioneering invention the commercial application would not
exists. Thus, he identifies that the sum of the pioneering inventionand its commercialvalue are jointproducts
which the inventor must be compensated for in order to efficiently incentivize future investmentin pioneering
inventions (Cooter and Ulen, 2012). The law treats fundamental research and its application as separate
functions despite the economic argumentofboth being jointproducts. “If transaction costs were zero, then
the Coase Theorem would apply: breadth of a patent does not matter to economic efficiency so long as
inventors can bargain with each other costlessly and make efficientcontracts” (Cooter and Ulen 2012, 121).
In the real world however, people mightnot be able to reach an agreement. We can imagine the
anger an inventor or author might feel towards individuals whom are granted patents over commercial
applications of pioneering inventions or granted copyrights for a derivative novel! The law has remedies that
are based upon the economic principles of NC and NH. NC is a guidance to law makers on how to facilitate
private bargaining that will allocate legal rights efficiently. Under NC the law can lubricate bargaining by
lowering transaction costs. In order to lubricate bargaining the law should seek to be as clearly and simply

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defined as possible (Cooter and Ulan, 2012). Blind anger and jealously can sometimes preventbargaining
betweenparties. UnderNH “When the parties fail to reach a private agreementwhere one is,in fact, possible,
they lose the surplus from exchange. To minimize the resulting harm, the law should allocate property rights
to the party who values them the most” (Cooter and Ulen 2012, 93). In essence the parties are punished in
the interests of individuals in society. Thus, the surpluses that could have been gained by bargaining might
then be transferred to cover the costs society incurs by having to go through the courtsystems, and property
rights are then allocated by the courts to the party who values said rights the most. Economic principle
suggests that if a pioneering invention has little stand-alone value, then the commercial application value
should be transferred to the pioneering inventor in order to incentivize future inventions. Conversely,
pioneering inventions with high stand-alone value would already reward the pioneering inventor even ifthey
do notreceive any shares from the commercialprofits. Thus, in the case ofthe former copyrights and patents
should be broadly defined for pioneering inventions, and in the case for the latter copyrights and patents
should be narrowly defined (Cooter and Ulen, 2012).
As stated before duration of a copyrightor patent really means the amount of time that the inventor
can legally have hers/his monopoly. In the U.S. regardless ofproductdetails or marketspecific impacts that
an invention might have, the patent is generally twenty years in duration. Economics examines the optimal
life (duration) ofa patent in which a balance (hypothetical equilibrium) between creativity and dissemination
is reached. In terms ofinnovation,the longerthe duration the more society enjoysthe benefits ofinnovations.
The rate at which innovations occur however decreases, and marginal benefits from innovations decrease
as patent duration increases. This means that in terms of dissemination, or the benefits society would
experience from dissemination: lower prices for any products thatuse the patented inventions, causes a loss
to society as the duration for a patent increases. Society will respond to long patents by looking for
substitutes, the longer society has to look for substitutes the more substitutes it will find. Presumably, the
patent holder at some pointwill begin to experience losses in terms of the benefits of having a patent given

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that the market adjust to substitutes. Thus, the marginal costs from less dissemination decreases as the
patent duration increases (Cooter and Ulen, 2012).
Some economists suggests thatpatents should be granted in marketand invention specific ways so
that the optimal life of a copyright or patent can be determined. In other words they are suggesting the
replacing of regulatory governance for market efficiency. If the market is allowed to efficiently allocate
copyrights or patent durations, then the optimal life could be expressed in terms of supply and demand.
Cooter and Ulen (2012) mention the tiered German patent system which extends either major patents or
petty patents. In the German system major patent holders pay a fee that increases as the duration gets
longer. The German system is Kaldor-Hicks efficiency stratagem that makes sense from the perspective of
individual’s in society who stand to lose; patent holders are monopolists, and because monopolies are
inefficient the monopolists should compensate those who stand to lose. This is a fine and just idea but it is
functioning under the assumption that patent holders are only profiting from tangible commodities. The
German patent system pays no attention to the incentives created by incommensurables and intangibles like
Pride. Also, from the perspective ofindividuals in society the transaction costs of creating a mechanism to
keep track of the thousands of potential petty patents, together with the lack of innovation due to losses in
incentive could be potentially catastrophic for the American Capitalist way of life!
In terms of economics trademarks do notconcern themselves with innovations, limited monopolies,
or dissemination. What trademarks do is “reduce the cost to consumers of searching for a product with
specific qualities. The principal economic justification for granting property rights to trademarks are that they
lower the consumer search costs and create an incentive for producers to supply goods of high quality”
(Cooter and Ulen 2012, 132). Cooter and Ulen (2012) explain that trademarks are granted because
economics recognizes that reputational aspects ofbranding create value, much like it does for the fine arts
as expressed by Xiyin Tang (2012) and Joseph C. Gioconda (2008). Trademarks do not generally create
monopolies, preventinnovation, or preventdissemination which is why in terms ofduration, a trademark can

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be maintained in perpetuity (Cooter and Ulen, 2012). Trademarks are recognizable symbols ofsuccess and
because they are recognizable,producers are incentivizedto produce highquality products. There is nothing
less productive than a firm whose trademark is associated to poor quality. All we need do is consider the
American auto industry to learn the power of poorly associated trademarks, American auto manufacturers
could not keep up with Honda and Toyota. It is not until American companies worked hard to re-establish
trust in their trademarks/products that these companies started making up some of their losses (Federal
bailout funds did not hurt either)! From the perspective of individuals in society, easily recognizable
trademarks lower transaction cost of consumers. In essence this is another example of NC lubricating
bargaining by lowering transaction costs. In terms of breadth, trademarks cannot be extended to producers
for generically identifiable items like a “camera” for example. There are instances in which a company is so
successful that their products becomes the generic identification for a type of product; for example Scotch
tape has become the American lexicon’s identification for cellophane tape. In these cases a trademark has
in fact created a monopoly throughhard work and trademark owners may sue to protecttheir property (Cooter
and Ulen, 2012).
Intellectual Property Laws vs. Moral Rights Laws
IP laws are not sufficient to attenuate the losses that fine artist’s experience. Trademark and
copyrightlaws are fundamentally structured to redistribute the value of illegal copies to the creating artists.
In the case offine arts however, “Almostall the market value for their work resides within the original” (Tang
2012, 251). IP laws have been successfully circumvented by the first sale doctrine, “the Supreme court in
the 1924 case Prestonettes, Inc. v. Coty…held that the defendant…had the right to compound or change
what it bought, to divide either the original or the modified product, and to sellitso divided” (Tang 2012, 242).
Clearly IP does notalways succeed in protecting the originator ofa creation. This can lead to after markets
that would confuse consumers, traditional IP law created the Lanham Act of 1946 in response to such
confusion. Under section 43 (a) of the Lanham Act, “The standard requires that an infringer causes

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confusion, mistake, or deception with regard to the affiliation, connection, or association ofsuch person with
another person, or as to the origin, sponsorship,or approval of his or her goods,services, or commercial
activities by another person” (Tang 2012, 245). This places the burden ofproofon the artists to demonstrate
that an infringement has even occurred in the first place. The Lanham Act prevents association with a
plaintiff’s trademark because itmightaffect the distinctiveness ofthe trademark. In an age where reproducing
copies or derivative works is possible, VARA moral rights supplementthe holes in traditional IP law. VARA
moral rights stipulations include the right of artistic integrity which prohibits the alteration, mutilation, or
modification of a work that might adversely affect the artist’s reputation, and the right of attribution which
grants the artist the ability to claim authorship ofa work and preventtheir authorship from being unknowingly
applied to another work that they did not create. Lastly, VARA gives the artist the right to protecttheir work
from being intentionally destroyed (Tang, 2012). In essence when an individual purchases a BMW, what
they have boughtis a vehicle that has been trademarked by the BMW corporation, the individual does notin
fact purchase rights to the trade mark or any other IP rights.
VARA laws are moral but they protect the artist’s economic interest with as much efficiency as
traditional IP laws. While some may argue that VARA’s moral foundation are too steeply founded in
personhood ideologies, a closer look reveals intimate consideration for how valuation of the fine arts is
structured. VARA protects the rights of the artists that are directly linked to the derivation of the demand
function for the artist’s brand and works of art. It is in the public’s interests for artists to protecttheir rights
because doing so protects the value of the art pieces/commodities purchased by the public (Tang, 20012).
VARA’s laws use words like authorship, reputation, and source identification to contextualize what is being
protected, but they serve a similar purpose to traditional IP laws:
A trademark owner’s rightto enjoin use ofits trademark in connection with a substantial alteration of
its originalproductis very similarto an artist’s rightto preventthe distortion,mutilation, ormodification
of his work that would subsequently be prejudicial to his honor or reputation. (243)

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An artist’s brand and reputation is what informs the value oftheir pieces, in the case ofabstractpostmodern
art, the value is not derived by a criterion ofthe artist’s virtuosity. Value is derived by the uniqueness oftheir
style and brand (TANG, 2012). The artist is supposed to be compensated for the work in establishing their
uniquely recognizable brand and style,“a fabricated construction, a deliberate posing by the artistto actively
engage in public identity-making” (Tang 2012, 235), style is an economic facetfor attributing value to fine art.
Like any other commodity/resource, fine art’s value is a function of its scarcity in terms of supply. If we are
allowed to sell the art we purchase piece by piece we would be affecting the value of the artist’s brand.
Piecemeal selling ofan artist’s work steals value from the brand by creating an after market that is inefficient
because it does not compensate the original artists, and it diminishes the value of other consumers whom
have purchased said artist’s brand. The more rare the commodity and the more excludable itis, the better it
retains its value. Allowing owners of an Andy Warhol original painting to cut it into pieces and sell those
pieces, would dilute the value of the overall market for that artist’s work and his consumers. VARA moral
rights laws can do for the fine arts what IP law does for other commodities. Some ofthe positive outcomes
are that reputational intent incentivizes artists to police their brand and by doing so they protect their
customer’s property value.
Moral Rights laws and the Broadening of Intellectual Property Laws
Art and culture from the aboriginal tribes in Australia are a very popular artform in need ofprotection
for its artists given how easily the art work is imitated (Van den Bosch and Rentschler, 2009). As identified
by Xiyin Tang (2012), moral rights protectthe artists’ reputation which is associated to the creation of value
for the artist’s products. In Australia with the emergence ofAboriginal artists, intellectual property does not
exclusively belong to one individual, the aboriginal tribes have communal ownership over an entire genre of
art (Aboriginal art) (Van den Bosch and Rentschler, 2009). This is a major departure from western concepts
of intellectual property, stated frankly some mightsee this as an abuse of moral laws. As per moral laws, it
is expected thatan artist has authorship over their brand, reputation, and art products. However, extending

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those rights to a group ofpeople over an entire genre can be problematic. One ofthe immediate outcomes
is that these rights can protectan individual artist’s depictions ofcommonly available stories from Aboriginal
culture:
Yanggarriny Wunungmurra, with the supportof the recently formed Aboriginal Artists Association,
took legal action againstPeter Stripes Fabrics over the reproduction ofWunungmurra’s work on a t-
shirt. The unreported decision in Yanggarriny Wunungmurra v. Peter Stripes Fabrics was that the
originality of Wunungmurra’s work, which he had learned from a senior member of his clan, was
based upon the distinctive features of his depiction of tortoises in the work…In other words, the
individual artist’s depiction ofa known story or traditional imagery could be used to argue the case
for individual copyrightand to support a claim to an original artistic treatment of a commonly held
motif. (123-124)
Not only do Aboriginal applications of IP allow protections of available cultural lore depicted by individual
artists, “Milpurrurru and Ors v. Indofurn Pty. Ltd. (1994) established that an unauthorized reproduction need
not be identical to or a complete reproduction of the original to infringe copyright. Minor alterations to the
plaintiff’s artworks to make the designs “less busy” by utilizing fewer colors and removing or simplifying
borders did not prevent the works from constituting a substantial reproduction” (Van den Bosch and
Rentschler 2009, 124). This is unduly broad, itbasically says thatAboriginal art communes by defaultgetto
determine whether or not an art work is infringing upon their style. This places the burden of proof upon
whomever is challenging the Aboriginal art commune. One of the most concerning outcomes is the hyper-
policing of Aboriginal artist’s works which can lead to censorship:
In the case ofMilpurrurru and Ors v. Indofurn Pty. Ltd. (1994), for example, a work by an Aboriginal
artist, Banduk Marika, depicting a Dreamtime story, was reproduced with minor aesthetic
amendments and without authorization on floor coverings manufactured overseas…The carpets
were then imported for retail in Australia by the defendant. Upon discovering the unauthorized
reproduction, the artist’s community was deeply upset, as the reproduction ofthis story by a person
outside of the community is forbidden. Furthermore, its reproduction onto floor coverings was
offensive.UnderAboriginallaw,the artist’s community held the artist responsibleforthe reproduction
and revoked her right to depict this important Dreamtime story in her future work. (124)
“As collective owners ofthe story depicted in the artwork, the community has an interest and responsibility
under Aboriginal law for its ongoing maintenance and integrity. In accordance with Aboriginal law, the
Dreamtime story is owned collectively by the artist’s community and administered by the community’s elders”

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(Van den Bosch and Rentschler 2009, 125). IP is supposed to transfer the profits from unauthorized copies
to the creating artist, and moral law tries to protectthe value of the original work for the artist. This however
seems like a willful broadening ofboth IP and moral laws to finance aboriginal tribe people’s lives! The art
will suffer for this and will notreflect the social changes within that community, itwill only reflect the financial
interests of the community. The artist’s utility was forcibly diminished in that she was forbidden to use her
childhood story because it is “owned” by the elders. What if that artist’s work signified an artistic rebellion
against the accepted aesthetic for Aboriginal arts, what if through her work a new generation of Aboriginal
artists could have emergedmuchlike Americanpost-modernartdeveloped inrebellionto Europeanconcepts
of high art during the Coldwar. IP laws when abused can be very dangerous to the arts. While it is not an
ideal facilitator to the Aboriginal arts market or any arts market, the legal issues that led to the creation of
Aboriginalarts associations and broadened the scope IPand moral rights laws helped to legitimize Aboriginal
art in the international scene (Van den Bosch and Rentschler, 2009).
As the literature mentions, IP in the U.S. was hesitant to assign moral or personhood protections for
artist’s works. The argument being that traditional applications of IP rights were sufficient to protect artists.
Xiyin Tang (2012) demonstrated instances in which IP rights were notenough to protectthe artist’s interests.
Instances where staple IP laws like the Lanham Act of 1946 have been successfully circumvented. Tang
identified that the fundamental structure of IP laws, which attempt to compensate an artist’s losses for illegal
copying, pay little attention for the value ofthe original art work and thus the need for moral rights via VARA
are necessary in the U.S. Conversely, the pervasive broadening of IP laws, which in my opinion were due
to abuses of moral laws within the Aboriginal arts market, paint a different picture altogether. The heavy
moral influence on IP law within Australia’s Aboriginal arts communities, grants a group of people too much
power, and leads to financially driven art works not creative expressions. With such polarity in the
interpretation of IP laws, how do artists create, how can the law protect creativity without suffocating it at the
same time.

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The Creative Process and the Optimal Structure for Intellectual Property Laws
Copyright laws are supposed to protect the interests of creative artists so that they maintain the
incentive to create. Some argue that if the objective of IP law is to ensure that creative works are continued
to be produced, then the current system is flawed because itlimits art works by volume due to copyrightand
patent constraints. These arguments stem from the beliefthat certain IP laws; copyrights and patents, are
too top heavy. Meaning that they protect the interests of the original artists while limiting other artists who
might use their works as inspiration or raw materials as stated by Joseph Fishman (2015):
Copyright protections exist primarily in order to promote creativity. Because creativity is a cumulative
process, entitling upstream creators to control downstream use has traditionally been justified as a
necessary evil, socially valuable only to the extent that it stimulates upstream creation in the first
place. Many believe that this value has been overstated. Our copyright system, the argumentgoes,
ends up stifling more downstream creativity than is offset by the marginal upstream creativity that
the system incentivizes. Upstream creators would have sufficient motivation to invest in creating
even without control of downstream use. Granting them this control raises downstream creators’
costs to the point where copyrightsuppresses more marginal creativity than it encourages. If the
necessary evilis notreally necessary,thenourintellectual property system—an instrument intended
to be “subservient to the value of creativity” — has become perverse. (1335)
Paradoxically, copyrights and patents are constraints that can promote creativity and innovation. While the
original intent of these laws was not to be creatively generative, findings in psychology provide some
explanation. Motivation studies, specifically goal setting theory states that so long as a task is specific and
difficult, the task will provide motivational energy and completion ofobjectives (Fishman, 2015). The issue
is in determining what the appropriate level of constraint should be, “Psychologists describe a curvilinear
relationship between creativity and constraint: increasing constraint up to a point increases creative output,
but pastthat point, any further increases will cause that output to drop off” (Fishman 2015, 1339). Creativity
must satisfy two main criteria; originality and appropriateness. The former refers to how new the productor
idea is, whereas the latter determines whether it is valued by society or not(Fishman, 2015). Many people
exhibitdifferentscales ofcreativity,that creativity some say is developedby anoperantconditioning. Operant
conditioning is the process by which an individual learns how to adapt efficiently to an environment. If we

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were to view copyrights as the environmental constraint, then being creative is the process oflearning how
to adapt to that environment. This process will produce necessary outcomes in order for the fine arts to
survive. In essence,despite copyrightconstraints, if a productis affecting your business you will learn how
to produce a competing product or you will go out of business!
Copyright laws produce constraints to other artists mainly because of two rights; the right to
reproduce a copyrighted work, and the right to prepare derivative works (Fishman, 2015). Copyright
protections are broad and they protect the copyrightholder againstmore than just having their work exactly
copied. Similar to VARA and moral rights clauses, copyrightlaws protectagainst nonverbatim copying that
identifies a work as being “substantially similar.” Thus, copying ofplots, narratives, television, music, or even
a face mask may possiblyinfringe upona copyright(Fishman,2015). The protectionagainstderivative works
is more of a catch all, it simply functions to further encapsulate the IP holder’s rights. Most infringements
occur on the copyrightside ofthese bundle oflaws and infringements that do notoccur on copyrightgrounds
will likely be caught by the derivative side of these laws. In most cases, if the infringement occurs on the
grounds of derivative rights, then it is naturally going to also be a copyrightinfringement as well (Fishman,
2015). One of the arguments in supportofthese laws is that they provide the originating artist’s incentive to
investin continued works through revenues from the derivative’s markets. An opposing argumentis that the
creative process and the output from just one artist takes too long, “Without an exclusive adaptation right,
perhaps the author ofan originalwork would rush adaptations to market, eventhough society would be better
off if she waited and gauged demand for the original” (Fishman 2015, 1349). Thus, many believe thatgiving
originating artists that much power is a lopsided trade off in terms of the benefits to society when available
creativity in terms ofart works remains low as a result (Fishman, 2015). I contend that from the perspective
of individual’s in society, given what Xiyin Tang (2012) expressed about how supply elasticity and artistic
reputation/brand protects the value of arts products already purchased, limiting the availability of arts
products inthe marketthrough copyrightlaws is economically justified and thereby abenefitto society. There

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are those who believe thatthe licensing process is too taxing and places a type of ceiling in the supply and
demand functions of art markets creating a loss to society in terms of arts products.
Patent theory is more optimistic in that it views the constraints placed upon derivative artists as
generative of competition and innovation (Fishman, 2015). In James P. Marsh Corp. v. U.S. Gauge Co.
Judge Evan Alfred Evans reversed a lower court’s decision of patent infringement because, “The accused
device successfully performed the patented invention’s function while omitting one ofthe elements disclosed
in the patent claims” (Fishman 2015, 1351). This type of marginal change spurs competition that maybe
important for society. Imagine if the law were unreasonably static and interpretation was fixed, that would
mean that one producer for can openers would hold patents and have a monopoly which would affectpricing
diminishing the utility of members ofsociety who need to open cans! Patent law holds that “circumvention
effort often absorbs as much creative energy as the conception or developmentofinvention itself” (Fishman
2015, 1351). Is that competition spurred equally in all markets, do marginal changes in art inspire artist to
“create around” works of arts? The danger in the application ofpatent law is that one size or situation does
not fit all:
These analyses are the optimistic exceptions to the rule. None of them, however,has asked whether
constraint can aid creativity. Answering that question moves beyond rational actor models that
suppose if we only ratchet up the disincentives to copy, then downstream creators will find some
other way to solve the problem,or maybe some better problem to solve. Such models run rightback
into the constraint critique. Supply and demand curves, critics have stressed, do notdescribe how
creativity works. According to those critics, copyright’s disincentives don’tredirectcreativity. They kill
it. If that much is true, copyrightmaximalists interested in promoting a creative culture are on a fool’s
errand. So long as creativity withers under copyrightconstraint and thrives when set free, focusing
on monetary incentives misses the mark. (1357)
The creative process is notrationally expressed bythe laws ofsupply and demand. Creating around a patent
may not cause incentive to creative similar products that the market will respond to favorably. In the arts
creating a similar work is consideredacheap vulgarity and it distills the value ofthe originalshould the market
start to prefer the knockoffs. Thus, marketspecific constraints must be carefully considered and to do so we
must examine the parameters of the market in question.

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“The constraints that are beststructured to generate creativity within a given population will be those
whose characteristics collectively satisfy two criteria. First, they should promote variability, that is,
differentiation from an existing corpus of exemplars…Second, because intrinsic motivation matters,
constraints should also promote engagement” (Fishman 2015, 1376). The constraints in order to be
generative must consider the source, target, scope, clarity, timing, severity, and polarity of its impact
(Fishman, 2015). The source ofa constraint refers to identifying the type ofconstraint the artist experiences;
invented, chosen, or imposed. Schoenberg’s dodecaphony is an example of an invented constraint,
Schoenberg could have simply composed his music using established western harmonic musical theory.
Instead he designed a twelve tone musical row technique in which he used every note in the scale for his
compositions challenging westernconcepts forwhat is and what is notconsonantordissonantharmony while
at the same time establishing his brand. The targetofa constraint refers to where the constraint takes place,
on the process side which limits how a task maybe completed or on the productside which limits the possible
solutions regardless ofthe process (Fishman, 2015). The law tries to protectrights on both the process and
product side, “Product constraint is copyright’s most easily recognizable restriction on creative
choice…processes can be patented” (Fishman 2015, 1381). The scope ofa constraint refers to how many
options/choices within a given artistic genre or other domain the constraint prevents. This constraint
dimension is particularly dangerous because the law is essentially playing God with non-rational creative
processes.
The “invisible hand” will not necessarily return an art market to equilibrium, and so these constraint
dimensions mustnotbe too broad. Had the Australian governmentconsideredthis dimensionbefore granting
the Aboriginal arts councils so much control, perhaps that market would be better off in terms on IP clarity
(Van den Bosch and Rentschler, 2009). The clarity of a constraint refers to how well defined the parameters
of a constraint are. Fishman (2015) argues that ambiguous parameters deter risk taking defeating the need
for “creating around” the constraints eluded to by Judge Evan Alfred Evans. I contend that defining the

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parameters of a constraints may limit the interpretability of the law, and by doing so the power ofthe judicial
process, which atits rootis to challenge public policies with the strength of the law in defense ofthe public’s
interests, is weakened. If for example legal statutes existed that precluded Judge Evan Alfred Evans from
challenging patents on the basis of strictly defined copyright/patent constraints, then the law would be
allowing monopolistic inefficiencies to persist.
Timing constraints refer to early, middle, and late constraints that may affect an artist’s process and
output. When an artistic creation takes place, the environmental constraints available at that time are
considered early time constraints. When a gate keeper like a publishing company refuses to distribute a
piece ofliterature until editing occurs this is called middle time constraints. Late time constraints refer to post
distribution occurrences, if for example a publishing company releases a book, but due to copyright
infringement or government policies is forced to remove the book, that occurrence would be a late time
constraint. Severity ofpunishment for not complying with constraint lies along a continuum, “A constraint’s
impacton creativity will depend somewhatonits locationalong a severity spectrumthat measures the stakes
ofnoncompliance” (Fishman 2015, 1389). The optimal level ofdeterrence for noncompliance is also genres
specific. In the case ofartists for example,noncompliance canbe equalto notbeing accepted by aparticular
discourse community of artists or not being able to sell outyour opening nightatthe Metropolitan opera. For
legal and economic scholars those punishments fall short of pecuniary/compensatory measures,butif you
consider that audiences are in fact an allied market that provide a unit of measurementfor an artist’s value,
then it is more relatable in terms of supply and demand. The polarity of a constraint refers to whether a
constraint is mandatory or prohibitory. Simply stated constraints are “either a positive rule, instructing what
must be done, or a negative rule, instructing what must not be done” (Fishman 2015, 1391).
What then are constraints that foster creativity, what is the ideal structure for protecting artists and
promoting innovation at the same time? Fishman (2015) believes that the wheel must not be reinvented
because our current system is not that bad, but he suggest a couple of marginal changes:

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Start with what copyrightgets right. Copyright law assigns the ability to prepare derivative works
exclusively to the copyrightowner. Others who prepare a derivative work without authorization are
not only infringers, but are also denied any copyrightprotection in the original expression that they
contribute to the existing work. One could, however, imagine an alternative system in which the
creator of an unauthorized derivative work would receive copyrightprotection in the new incremental
expression,butnevertheless remainunable to exploitthe derivative work without the originalowner’s
permission. That way, downstream and upstream creators would have leverage over each other in
bargaining. The downstream creator could not use the old material without permission, butneither
could the upstream creator use the new material without permission. (1394)
From the perspective ofdownstream/derivative artists the benefits ofthis type ofsuggestion is appealing, but
from the perspective of all individuals in society the suggestions are a bit redundant and costly. This
suggestion is assuming that the upstream/original artists are logistically close or willing to work with the
downstream artists. It is a very real possibility thatin today’s modern world a seventy year old artist may live
in Rome where they serve as a curator for the Vatican museum and they may not have the time to entertain
every upstartthat wishes to expand upontheirwork. Furthermore, since downstreamartists are notgenerally
established, the upstream artistwill have to investigate the neophytes’ trajectory and credibility in an effortto
protect their own work’s value and artistic legacy, all of which represent transaction costs to the upstream
artist. Fishman’s suggestion that downstream artists by receiving incremental copyrightprotections would
not exploitthe upstream artist’s works without permission mightbe impossible to enforce in our modern age
given the level of technological advancement. I would argue that because of how value in the fine arts
markets are established, a downstream artist’s association to an already established work in anyway would
already constitute exploitation, especially if they were to defile the art work affecting the upstream artist’s
reputation. IP is not perfectand has fallen short with respectto the needs ofspecific markets like the fine
arts for example. It is clear that in application some incorporation of moral laws and the entertainment of
generative constraints like source, target, scope, clarity, timing, severity, and polarity should be considered
but not at the costs of affecting the utility and value of upstream artists.
How can Civil, Criminal, and Intellectual Property Law Attenuate Artistic Criminality?

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The art world is experiencing a record high degree ofart forgeries, these types ofcrimes persistin
large part because the art market is lucrative and creating forgeries is not very costly to the criminal. Also,
deterrence is notoptimal because the likelihood ofpersecution remains low (Gioconda, 2008). Originally the
marketfor fine arts was relatively small and elite in terms ofhigh costs and sophistication ofclientele. As the
former obstacle was surmounted by the increased wealth amongst American consumers, sophistication
remained the only restrictor of the market for fine arts. Conspicuous consumption has fluxed in and out of
fashion, and more people are purchasing fine art catapulting that markets revenues upwards of six billion
dollars (Gioconda, 2008).
Money can buy many things, but intelligence and cultural sophistication remains elusive even to
those within the highestof income brackets. This disparity between informed consumerism and wealth is a
harvestground for counterfeiting criminals that has spurred the search for legal means by which to attenuate
this type of criminality. The rational criminal will not be deterred by current legal remedies because
punishment occurs with very low probability. “A rational decision maker takes the probability ofpunishment
into account when contemplating the commission ofany crime” (Cooter and Ulen 2012, 465). Due to the
relatively low legal priority ofcounterfeiting and forgery with respectto the arts on behalfof law enforcement
agencies, “the market for counterfeiting goods demand little investment capital, carries a low risks of
prosecution,and generates extraordinary economic returns”(Gioconda2008, 3). It is impossibleforagencies
without proper curatorial training to keep track ofhow many fake goods make itinto the U.S. It is estimated
that onthe international level,six hundred and fifty billiondollars’worthoffake merchandise enters the market
(Gioconda,2008). This has an effecton insurance markets that complementthe higherend fine arts markets.
As expressed by Xiyin Tang (2012), aesthetic virtuosity does notdefine value for the fine arts, rather
reputational establishmentand recognition ofstyle, or as Gioconda (2008) calls it “aura” of the piece creates
the value for a work of art. Some economist view the process of establishing value for the arts as “the
quintessential example of commodity fetishism” (Gioconda 2008, 3). This view comes about because the

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process ofestablishing value forfine arts is volatile. The supply and demand curves forspecific artist’s works
are arbitrary and inconsistentover time, thatvalue is also exaggerated due to the auction based environment
in which value is generally determined (Gioconda, 2008). Insurance markets which complementthe fine arts
markets by securitizing values are subjectto the exaggerated values offine arts, and in the case offorgeries
experiencehightransaction costs. The law has responded byrecognizingthat“art forgeries presenta mutual
mistake of fact” (Gioconda 2008, 4).
When both parties in a contract have a mutual mistake about a fundamental fact, in this case the
assumption that an art work is authentic, the law assigns liability to the party who could bear the costs of
taking care at the leastcosts (Cooter and Ulen, 2012). In these cases, unilateral rescission ofthe insurance
contract is allowed and the insurance company generally does not have to return the high insurance
premiums (Gioconda, 2008). In my opinion this application ofthe legal theory ofmutual mistake about facts
could resultin turning a victim into a rational criminal. Some may argue that because the owner of a forgery
is most likely going to be ata loss given that they have paid the high price for the forgery and the insurance
premiums, ifthey were to learn of the counterfeit nature of the art work before the insurance company, then
they would have incentive to have the piece “stolen” and file a claim before the insurance company has time
to determine the art work’s true value. Mutual mistake aboutfact must allocate liability to the party who can
bear the responsibility to take care at least costs. The insurance company would have subject matter
expertise in order to appraise an artwork and as such has the ability to take care more easily, this application
of the legal theory is incongruous in my opinion and a likely result of lobbying by powerful insurance
companies. Criminal prosecution for art forgeries are highly unlikely explains Gioconda:
Criminal prosecutions against arts forgery are seldom brought, in part due to high evidentiary
burdens and law enforcement disinterest. However, in an attempt to combat the threat that fake art
poses,various governmentalagencies are empoweredby statute to prosecute suspected artforgers.
While prosecutions are rare, they are occasionally brought in extreme cases. (5)

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At the Federal level the law has been successful in bringing up criminal art forgery charges in conjunction
with Racketeering Influenced and Corrupt Organizations Act(RICO), butnotas a standalone criminal charge.
Additionally, the Federal Trade Commission authorized under the FTC Act can bring independentcharges
against forgers which they did in FTC v. Magui Publishers, Inc. (Gioconda, 2008). Under state laws criminal
prosecution for forgery is possible via prohibitions againstcriminal fraud or against simulation of signatures,
but the state has to prove intent. Because the standard of proofis so high prosecution for these crimes at
the state level is low. Due to the difficult nature of prosecuting on a criminal basis, many forgery cases are
addressed in civil suits as breach of contract and or tort law (Gioconda, 2008).
The predominant strategy employed to combat forgery however is to sue on the grounds of civil
fraud. The plaintiff has the burden to “prove that the defendantfalsely represented a material fact, that this
representation was made with intent to deceive” (Gioconda, 2008). Further complicating the situation, when
an art work is purchased through auction houses or galleries, if the consumer has signed a standardized
contract which limits the claims that the consumer may assert against the auction house, that contract will
limit what the law can do to help the victim. Given that criminal law falls short of substantively addressing
counterfeiting and forgery, and because as expressed above deterrence has fallen to civil and tort legal
remedies, IP is now being considered as an alternative option for dealing with counterfeiting and forgery. IP
through copyrights has components that can serve in the identification and ex-ante market protection if the
art work is not public domain. Copyright laws can combat certain types of forgery because it enjoins the
forgerand triggers civil liability through the CopyrightAct(Gioconda, 2008). This is greatfor the identification
of the criminal act but it does nothing to deter the individual rational criminal because the standard of proof
is too high in a civil, tort, and criminal arenas. Gioconda (2008) identifies that copyright law have an
underutilized componentthrough U.S. customs which can seize and destroy forged or counterfeited works.
This is a powerful toolfrom the perspective ofindividuals insociety. Itprevents the marketfrom being flooded
with fakes that dilute the value of artist’s brands and the goods that have already been purchased by

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consumers. The problem is that it is a voluntary copyrightrecordation process atcustoms, and that agency
would then have to absorb the costs of training their employees in the processing of copyright claims or
detecting counterfeits or forgeries.
Intellectual Property and Fine Arts Conclusion
We have looked atthe relationship betweenthe fine arts and intellectual property laws. The literature
has revealed thatU.S. interests in the protection ofartistic endeavors in terms of IP, developed as a resultof
wanting to protect its economic interests after its import/exportstructure changed. We have examined and
compared the moral strings attached to VARA with traditional IP laws. Looking atthe Aboriginal arts market
and how that market has influence and expanded Australia’s IP laws, I have made an argument against the
unnecessarily broadening in the interpretation of IP laws. Additionally, we have looked at what IP does to
the creative process and examined how to best structure our laws so that their constraints are creatively
generative. Finally, we have reviewed the criminality of counterfeiting and forgery finding that attenuating
said crimes is difficult under all legaldoctrines. Lookingto IPas a method by which to address crimes against
fine arts is also limited in its potential to address criminality. Copyright law through customs can address
some aspect of the problem ex-ante by preventing counterfeit or illegal items from entering the country.
Overall IP law is not equipped to deter said criminal offenses at the individual level, but if the crimes are
committed by corporate bodies, then the bundle of laws that make up IP; copyright, patent, and trademark
can create optimal deterrence due to legal costs regardless ofwhether the state’s cases are successful in
convicting corporate criminals.
Works Cited
Cooter, Robert, and Thomas Ulen. Law & Economics. 6th ed. Boston: Prentice Hall, 2012.
Fishman, Joseph P. 2015. "Creating around copyright." Harvard Law Review 128, no. 5: 1333-1404.
Business Source Elite, EBSCOhost (accessed May 6, 2015).

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Joseph C. Gioconda, Can intellectual property laws stem the rising tide of art forgeries, 31 Hastings Comm.
& Ent. L.J. 47 (2008)
Tang, Xiyin. 2012. "The artist as brand: toward a trademark conception of moral rights." Yale Law Journal
122, no. 1: 218-257. EconLit, EBSCOhost (accessed May 6, 2015).
Van den Bosch, Annette, and Ruth Rentschler. 2009. "Authorship, authenticity, and intellectual property in
Australian aboriginal art." Journal of Arts Management, Law & Society 39, no. 2: 117-131. Corporate
ResourceNet, EBSCOhost (accessed May 6, 2015).