Overlapping rights fail

3. Overlapping Rules and Rights Two common legal features that intellectual property owners factor into their appropriability calculus is the availability of other legal rights of exclusion, such as trade secret, trademark, or contract law, and regulatory requirements in the marketing and distribution of creations or innovations. Patent and copyright law already have been tailored to respond to these features in some respects. For example, with respect to overlapping rights, Professor Jerry Reichman has pointed out, trade secret law provides a liability-rule substrate to the property-rule regimes of patent and copyright.229

As important, product differentiation strategies supported by trademark law supply an important source of power over price. The effects of trademark and trade secret protection may be sufficient to induce the desired level of [footnote omitted] investment even in the absence of copyright or patent rights in some cases.230 Moreover, the exclusivity provided by copyright or patent rights facilitates the producer’s ability to establish strong, highly distinctive marks.231 This effect likely explains why consumers continue to purchase branded over-the-counter drugs such as Tylenol® or Advil® at a significant premium even when they have available cheaper generic drugs that are chemically perfect substitutes.232 In markets in which this effect is particularly strong, the level of protection may be reduced by, for example, reducing the term of protection without significantly reducing the incentive effects the protection supplies. One might similarly analyze the presence or absence of effective technological controls that perfect excludability in the absence of exclusive rights.233

In addition to overlapping rights, the pharmaceutical industry faces overlapping regulation because to take a patented medicine to market, a firm must satisfy health and safety standards as well as the standard for patentability.234 The health and safety regulatory process diminishes the effective period of market exclusivity offered by the patent.235 Patent law already has been tailored in response in two ways. The term of patent protection can be extended based on regulatory delay,236 but also generic entry at the end of patent protection has been facilitated by Hatch [footnotes omitted] Waxman.237 The pharmaceutical industry has deployed two strategies to extend the period of monopoly on a patented medicine. First, it has chosen to appropriate the limited exclusive right that the law offers to first-moving generic manufacturers.238 Second, it has sought and obtained a new exclusive right on the clinical trial data necessary for regulatory approval of generic equivalents of patented medicines. This tailored right of “data exclusivity” has been written into bilateral “free trade” agreements between the United States and a number of trading partners, and in the European Union.239