The Profits of Infringement: Richard Posner v. Learned Hand

This article considers economic explanations and legal foundations for the two distinct rules that are present in the case law of copyright and trademark infringement. The next part addresses cost concepts in two ways: first, by providing the conventional terminology and concepts of cost that are used in economics and accounting and second, by providing empirical evidence that the choice of legal rules is important. Part III provides the foundations in law and economics for this discussion, first considering the copyright and trademark statutes in detail, then applying some simple economic reasoning to illuminate the alternative rules. Part IV documents the appearance of each of the alternative rules, both in appellate case law and in legal commentaries. Part V makes the case that economic reasoning supports the full absorption rule. Part VI returns to the case law, discussing how the full absorption rule as articulated in Sheldon actually works, given accounting practices, to capture an appropriate measure of profits.