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Intellectual Property and Product Liability

Economics and law are one of the subjects that have found a lot of traction in the modern economic and law studies. There are many areas where these two subjects meet and which are used as the basic examples of creating a general idea of society and relationships. On one side, we have economics, which is the backbone of development in a society, and which takes care of different aspects of life. Economists use a lot of theories and models to predict consumer behaviors. When a company wants to launch and new product into the market, they first look at the possibility of sales and gaining revenues from the market. This involves researching and acquiring all the necessary information on the potential consumption of the product. Consumers don’t respond as expected, and the company can choose not to continue with the investment. It is all about having perfect information in a competitive market.

On the other hand, there is law and order, which guide the society on what is right and wrong. Law also applied different approaches to reach conclusions on incentives or punishment for certain deeds by individuals. Judicial systems have been established to ensure there is respect among the people and that the action of some does not affect others intensely. Economists believe that human beings are rational decision-makers and will choose something based on what benefits them the most. If a decision does not seem good enough for them, they simply toss it aside and for what makes them happier. Theories like Deontology and Utilitarianism focus on making choices based on the happiest outcome. And others like the game theory try to explain the most probable course of action specific individuals are most likely to take.

Economic as the law is a subject that deals mainly with contracts, tort, and criminal laws. In terms of contracts, it seeks to protect companies from the losses incurred when one party fails to meet their end of an agreement. In this case, there are punishments and incentives to be paid, making it hard for parties to bridge their contracts. Criminal laws are concerned with some decisions that people make that would course harm to other people. And tort laws are about property ownership, which is the main subject.

It is important for one to first understand economic and law background before making progress into intellectual properties. As we have seen above, there are many issues concerning property ownership, and when someone makes a mistake, they have to bear the consequences – this is called liability. It’s only ethical for people to live in a specific manner that conforms to society's norms. Through Coase Theorem, the economic analysis of law explains the reason behind certain actions in the two fields combined. Intellectual property and liability are two important topics covered under these areas.

What is Intellectual Property (IP)?

Intellectual property can be based, described as the creation of the mind. It includes inventions, literary and artistic works, designs, symbols, names, and images used in commerce. When you talk about properties and ownership of properties, some people only think about tangible assets created from hands' works. Intellectual Properties are assets that come from one’s imagination. It is said that it takes a lot of effort to come up with content such as music ideas, which should be respected by all people. In commerce and other economic related subjects, these properties enjoy legal protection, just like any other form of property, through contracts, torta, and criminal laws. For instance, deontology theories believe that human beings have a nature of being evil and cannot be trusted to make the right judgment. Hence, more emphasis is placed on the system – courts protect intellectual properties.

Examples of laws protecting IP include patents, copyright, and trademarks. Note that these mind creations are mostly intended for financial gain. And therefore, the law ensures that people earn recognition or financial benefits from what they invent or create. It is designed to strike the right balance between the interests of innovators and the general public interest. By so doing, Intellectual property seeks to foster and the environment in which creativity and innovation can be natured well. Those who create content own the full rights to their content, and anyone who tries to steal it will face legal consequences. There are very harsh penalties to using another person’s creation without their consent.

Protecting Intellectual Property

Basically, IP property rights are a common type of legal IP protection enjoyed by the creators. However, the right extends far beyond individuals and to the whole society, where they have largely contributed to the world economically. A lot of companies in different industries rely on the enforcement of their patents, trademarks, and copyrights to enjoy selling their products without bad competition. And in the same aspect, consumers are assured of quality when buying IP-backed products. It is only when these laws are enforced that the society lives in good harmony. The relationship between manufacturers and consumers is crucial to the development and sustenance of markets, which is why each one must always try to play their part.

Criminal activities like piracy and counterfeit products can cause devastating consequences to the economy. First, the pirated content creator will not sell their products if there is the same cheap or even free content on the market. This means they will not gain any revenues from their effort. On the other hand, fake products make consumers lose trust in the system. And when households stopping consuming, the nation’s GDP is at stake. Hence, there are many benefits to IP and the value of protection.

The main purpose of IP is to encourage the creation of new content and idea. When there is a new technology, art, and inventions, there is said to be good development within the impacted economy, and there are high chances of encouraging economic growth. Protecting intellectual properties offer the necessary incentives for individuals to continue producing things that create new jobs, technologies, and other ideas while enabling the world to grow even faster.

The U.S Chamber of Commerce’ Global Innovation Policy Center states that intellectual property crates and supports high-paying jobs. IP-intensive industries are the largest employers, offering more 45 million jobs to Americans and many others on a global scale. On average, a worker in this industry earns close to 50% more than their counterparts in a no-IP market.

Also, Intellectual Property encourages economic growth and competitiveness. General America’s IP is estimated to be worth $6.6 trillion. This is more than the nominal GDP of any other economy in the world. These figures also indicate that IP-intensive markets account for more than 1/3 of the total US GDP. Reports have shown that 52% of all U.S merchandise exports are related to IP, which amounts to close to $842 billion.

To achieve these goals, Intellectual Properties are protected through the following laws:


This is a legal term used to define the rights that creators of literacy and artistic works have on their creations. These laws cover a wide range of works from books, music, paintings, sculpture, films, computer programs, audio and video content, technical drawings, and many other things. Copyrighted material cannot be copied or distributed by anyone without legal consent from the creators. There are criminal laws against such activities, which can have serious consequences, even for a small mistake.


Patents are exclusive rights granted for an innovation. It is more or less like copyrights, only that it goes beyond just protecting the property. Generally, a patent right offers the patent owner of the IP with the right to make decisions on how or whether others can use their inventions. To gain patent rights, the owner has to share the technical information about the invention to the public, through a published patent document.


Trademarks are signs that distinguish the goods in or services of one enterprise from others. Trademarks may easily be the oldest forms of IP protection, dating back to ancient times. Artisans then used their signature or ‘mark’ on their products. And it is the same idea working with modern trademarks. Consider trademarks as the logo of a company, something that uniquely identifies one brand from another.

Industrial designs

Although these are not very common, they are also very important aspects of IP protection. An industrial design is the ornamental on or aesthetic aspect of an article. A design has three-dimensional features, like the shape of a surface, or two-dimensional features, as in patterns, lines of colors. For example, a building design drawing is a property of the architect who made it and may not be used without their consent. But once handed over to the owner or the engineers, they can be changed as they see fit.

Geographical indication

These are indications and appellations of origin and signs used to identify and mark goods that have specified geographical origin. The goods may also possess qualities, a reputation, or characteristics that can only be attributed to that place of origin. Such an indication commonly includes the name of the origin's place from where the said products come from.

Trade secrets

Confidential information is always sealed in documents indicated as confidential. Trade secrets IP rights protect such information. These rights can be sold or licensed. When licensed to use, one has to follow the disclosure of such secret information to the latter is a manner of honesty, avoiding commercial practices with other users. Doing contrary to these indications is considered an unfair practice and violation of trade secret protection, which can attract huge penalties for the violator.

Product liability

When companies own Intellectual Properties or any other products, they are liable for anything concerning the production and use of these properties. Defective or dangerous products are regarded as some of the biggest causes of thousands of injuries across the world. Product liability law is the set of legal principles concerning the party responsible for defective or dangerous products. These laws are different from ordinary injury laws, and they sometimes make it easier for the victim to recover damages.

Product liability is a situation where the manufacturer or seller is held liable for putting defective products on the market and consumers' hands. As much consumers are supposed to understand how the products can be used safely, it is important the firm producing it ensures the utmost safety. Responsibility for a product defect that may cause injury is on all sellers in the distribution chain of the said product. Generally, it is a requirement by law that products meet the ordinary expectations of consumers. In a case where the product is defected, or harmful, it cannot be said to meet normal expectations of consumption.

Currently, there is no federal product liability law. However, product liability claims follow state laws and are discussed under the models of negligence, strict liability, and breach of warranty. Also, each state has commercial statuses, modeled in the Uniform Commercial Code, that carries warranty rules on product liability.

Product liability arises when some point of the product is sold in a market place. Traditional, there must have been evidence of a contractual relationship called ‘privity of contract’ between the injured consumer and the supplier of the product for any recoveries to be made. This requirement does not exist in many states, and the injured person does not even need to be the one who bought the product in the first place. Any person injured by a defective product can recover their injuries as long as the product was already in the market.

The liability of a defective product can rest in any participant in the product's distribution chain, e.g., manufacturer, manufacturer of components used in the product, the assembler or installer of the product, the wholesaler, and the retail store that gave out the product to the consumer. Under strict liability, there must be evidence of the product's sale in the regular course of the supplier’s business. Hence, not every seller of the product can be held in a product liability action.

For economic growthIntellectual Property, laws concerning Intellectual properties and product liability have been established to ensure acceptable moral standards. And economics and law ensure that each of them is well understood and followed for proper accounting.

Author: James Hamilton

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