Traditional IPR balkanizes information, liability rules are key

The proposed compensatory liability regime was articulated with the historical problems of the developed industrial world in mind, but it will prove beneficial in other contexts as well. For example, the development of the Internet, digitization, and electronic commerce pose new challenges to small scale innovation. These advances reduce the cost of copying, shrink lead time, and increase the risk that small-scale innovators will take matters into their own hands and create totally unregulated states of artificial lead time through encryption and adhesion contracts. If enforceable, these electronically imposed standard form contracts could degenerate into a basis for asserting private intellectual property rights that override all the public-interest safeguards that had ensured access to the public domain under traditional intellectual property laws. 187 There are serious risks that these standard-form adhesion contracts could thus balkanize the information commons and reintroduce conditions that impede the flow of information.

However, the enactment of a general purpose innovation law on modified liability principles would lessen these risks because it would offer those who innovate in this environment a way to alleviate market failure without impoverishing the public domain. Indeed, the convergence of telecommunications and digital technologies may itself contribute to the operation of the liability regime. Online communication will expedite claim registration, help innovators find the know-how they need, facilitate negotiations, and promote the use of standardized terms. Monitoring use and collecting royalties will likewise prove easier to organize and less costly to implement online.