DOUGLAS G. BAIRD ET AL., GAME THEORY AND THE LAW 147 (1994).

175. On pooling equilibria generally, see id. at 145, 154-57 (noting possibilities and limitations of contracts to separate among different types of contracting parties); Ayres & Gertner, Filling Gaps, supra note 144, at 111-112; Johnston, supra note 145, at 625 and n.36.

176. See BAIRD ET AL., supra note 174, at 145 ("A rule that mandates particular actions or particular contract terms imposes a cost on the party who would, in fact, bargain for a different term."); O'Rourke, supra note 139, at 516 ("A program that includes the Atari/Sega right to decompile would probably cost the end user more than one that did not"). For a similar application of this concept to the classic case of shippers and carriers in the context of Hadley v. Baxendale, 9 Ex. 341, 156 Eng. Rep. 145 (1854), see BAIRD ET AL., supra note 174, at 147-52; Johnston, supra note 144, at 630-31; Ayres & Gertner, Filling Gaps, supra note 144, at 94-95, 112-113. As Ayres and Gertner emphasize, contracting around a default rule may enhance efficiency by revealing information but also increase transaction costs. Both effects must be taken into account in assessing the desirability of any given default rule.

177. A similar concern underlies Judge Easterbrook's reasoning in ProCD, Inc. v. Zeidenberg, 86 F.3d 1447, 1449 (7th Cir. 1996) (arguing that prohibition on commercial use of software facilitated price discrimination); Karjala, supra note 120, at 538-39 (agreeing that price discrimination could yield benefits to software vendor but arguing that legislation rather than contract is the appropriate method of deciding the issue). Judge Easterbrook makes a related point using the pricing of academic journals as an example, in which he argues that rampant copying in academia (on which see ELLICKSON, supra note 149, at 258-64) has induced publishers to raise subscription costs to prohibitive levels as a form of "advance fee for photocopying." Frank H. Easterbrook, Cyberspace and The Law of the Horse, 1996 U. CHI. LEGAL F. 207, 209 (1996). Readers interested in Judge Easterbrook's opinion in ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996), may find in his article at least a partial elaboration of the principles on which the opinion rests.

178. U.C.C. § 2B-105, Reporter's Note 3 (Aug. 1, 1998 Draft).

179. Reporter's Note 3 to section 2B-105 recommends that courts follow this approach: "Under the general principles in subsection (b), courts also may look to federal copyright and patent laws for guidance on what types of limitations on the rights of owners of information ordinarily seem appropriate, recognizing, however, that private parties may have sound commercial reasons for contracting for limitations on use and that enforcing private ordering arrangements in itself reflects a fundamental public policy enacted through the [U.C.C.] and common law." Id. This statement reflects as well can be expected the difficulties Article 2B faces in reconciling its free contracting philosophy with social interests that might be implicated by such contracting.

180. See Karjala, supra note 120, at 515, 518-20; Lemley, Economics of Improvement, supra note 139, at 996 ("[I]ntellectual property rights must permit prices to rise above marginal costs in some cases if they are to have their intended effect of providing an incentive to create. This means that in many cases fewer people will buy the work than if it were distributed on a competitive basis, and they will pay more for the privilege."). Cf. Kaplow, supra note 160, at 1514 ("[T]he very purpose of a patent grant is to reward the patentee by limiting competition, in full recognition that monopolistic evils are the price society will pay.").

181. See Landes & Posner, supra note 159, at 326. To the degree copyright is analogous to patent law, there is little reason to have confidence that the optimal balance has been struck, or even that the optimal balance is knowable. Cf. Kaplow, supra note 160, at 1833 ("[O]ur knowledge is inadequate to inspire great confidence even in the desirability of having a patent system at all, much less in the ability to make the subtle measurements of marginal effects that determine the ratio implicit in the optimal patent life.").

182. See id. at 1825 n.29 (discussing risk associated with innovation and concomitant need for increased potential of returns under plausible assumption of increasing marginal costs and decreasing marginal benefits to extended patent term); id. at 1831 ("Every patent life implies a specific ratio. The ratio implicit in a given patent life simply refers to the ratio of incremental reward to incremental loss that results from marginal adjustment of the patent life"); id. at 1840 ("[S]etting the patent life and determining patent-antitrust doctrine are interdependent endeavors"); McGowan, supra note 95, at 830-32 (noting effects of risk adjustments on incentives to invest).

183. Cf. Kaplow, supra note 160, at 1825 ("The optimal patent life is that length of time at which the marginal social cost of lengthening or shortening the patent life equals the marginal social benefit.").

184. See Jefferson Parish Hosp. No. 2 v. Hyde, 466 U.S. 2, 37-40 (1984) (O'Connor, J., concurring); P HILLIP AREEDA & LOUIS KAPLOW, ANTITRUST ANALYSIS 441-42 (1988); HOVENKAMP, ANTITRUST POLICY, supra note 3, § 8.3 at 219; Lemley, Economics of Improvement, supra note 139, at 996 and n.26.

185. One analogue in antitrust would be its favorable view of certain economic arrangements, such as vertical integration or mergers, that enhance productive efficiency-the ratio between a firm's inputs and production. Hovenkamp, After Chicago, supra note 57, at 237-38. As Professor Hovenkamp points out, the notion that firms should be allowed to enhance their own productive efficiency is not generally controversial. Favoring steps that maximize production for a given level of inputs, however, is only tangentially related to the dominant copyright question of how strong intellectual property rights should be to strike the optimal balance between production and dissemination of copyrightable work. There is also a relationship between antitrust and copyright returns in the sense that antitrust, like contract, is part of the legal background against which copyrighted work is exploited. A change in antitrust doctrine at its intersection with copyright would therefore at least potentially change the effective scope of the copyright grant and therefore the returns available to the copyright holder and the social costs created.

186. Technological advances have rendered the natural monopoly conclusion less certain and less stable than it once was, and network theory has assisted in directing our attention to interfaces and standards as points of concern as well. See Lemley & McGowan, Network Effects, supra note 95, at 549-51; Jim Chen, Titanic Telecommunications, 25 S OUTHWESTERN UNIV. L. REV. 535, 542 (1996) ("The accelerating pace of the technical revolution in telecommunications" may produce a paradigm shift). As of this writing, however, competition in local telephony has yet to emerge. See Bart Ziegler, Whatever Happened to Competition for Local Phone Service? It's Simple Economics, WALL ST. J., Sept. 21, 1998, at R6 (noting little change in local telephone competition in wake of 1996 Telecommunications Act).

187. Alternatively, one could conceive of the case as a tying claim. In either event, the problem involves use of economic power in one market to derive revenues from an adjacent but distinct market.

188. See, e.g., Lasercomb Am. v. Reynolds, 911 F.2d 970, 973 (4th Cir. 1990).

189. See O'Rourke, supra note 139, at 542 ("It is impossible to know where the balance between creativity and competition would settle if either rule-preemption or nonpreemption of decompilation provisions-were adopted."). For Professor O'Rourke the inconclusive nature of copyright principles as applied to these problems suggests the invocation of antitrust and, in particular, the essential facilities doctrine. For an alternative view, see Hanna, supra note 160, at 318 ("Antitrust doctrine does not provide the tools necessary to judge whether a particular mode of exploitation exceeds the permissible bound of the statutory copyright monopoly conferred. Antitrust doctrine does not define the scope of copyright privileges. It looks to copyright law to ascertain what degree of anticompetitive conduct is permissible.") (emphasis added). Hanna concludes that "[i]n weighing claims of copyright misuse, courts must develop a functional delineation of the scope of the exclusive privileges inherent to a copyright grant that is compatible with the intellectual property statutes' goal of promoting the development and diffusion of innovative works. Antitrust law is of little aid in this regard." Id. at 418 n.110.

190. Professor O'Rourke states a legitimate concern that it is "unclear whether a copyright misuse defense grounded in an antitrust violation requires the usual detailed antitrust proof of that violation" while noting that "the quantum of proof is somewhat less." O'Rourke, supra note 139, at 550. On the debate generally, see Lemley, Beyond Preemption, supra note 6; AREEDA & KAPLOW, supra note 183, at 183.

191. See Practice Management Info. Corp. v. American Med. Ass'n, 121 F.3d 516, 521 (9th Cir. 1997) ("We agree with the Fourth Circuit that a defendant in a copyright infringement suit need not prove an antitrust violation to prevail on a copyright misuse defense"); Lasercomb Am., Inc. v. Reynolds, 911 F.2d 970, 978 (4th Cir. 1990) ("So while it is true that the attempted use of a copyright to violate antitrust law probably would give rise to a misuse of copyright defense, the converse is not necessarily true-a misuse need not be a violation of antitrust law in order to comprise an equitable defense to an infringement action. The question is not whether the copyright is being used in a manner violative of antitrust law (such as whether the licensing agreement is 'reasonable'), but whether the copyright is being used in a manner violative of the public policy embodied in the grant of a copyright.").

192. Professor O'Rourke, for example, states that application of tying principles in software markets is appropriate because "the Copyright Act grants a limited monopoly that is not intended to permit the copyright owner to leverage its statutory monopoly into another market." O'Rourke, supra note 139, at 548. If the Copyright Act reflects this policy, that fact alone should preclude conduct that might escape sanction under antitrust tying principles.

193. Conversely, one could conceive of a regime in which the producers of Titanic owned the copyright in the film but could not assert it to squelch derivative products that competed in distinct markets-such as books about the making of the film that incorporate its footage, T-shirts or posters with photographs of the stars, and the like. Or one could conceive of a what Professor Lemley has called a "blocking copyrights" regime in which creators of derivative works owned rights in their improvement but would have to negotiate with the owner of rights in the original work to avoid infringement claims. See Lemley, Economics of Improvement, supra note 139, at 1074-76. Even if both alternatives would enhance social welfare relative to the status quo, it does not follow that a manufacturer of a derivative work may (or should be able to) assert an antitrust counterclaim to an infringement action.

194. Professor Areeda referred to this instead as "an epithet in need of limiting principles." Phillip Areeda, Essential Facilities: An Epithet In Need Of Limiting Principles, 58 ANTITRUST L.J. 841 (1990). Professor Hovenkamp favors elimination of the doctrine accompanied by adjustments in the rules governing a monopolist's refusal to deal. HOVENKAMP, ANTITRUST POLICY, supra note 3, at § 7.7. Professor O'Rourke has suggested the doctrine as of potential use in informing copyright fair use analysis. See O'Rourke, supra note 139, at 546. For the reasons stated in the text, I am skeptical of the ability of the essential facilities doctrine to provide efficient answers in such cases, particularly given the significant incursion into intellectual property law the doctrine implies. Development of antitrust doctrine relating to refusals to deal by monopolists that entail anticompetitive effects outweighing any benefits-Professor Hovenkamp's suggestion-would seem to be a better course to follow. See Image Technical Servs. Inc. v. Eastman Kodak Co., 125 F.3d 1195, 1209-11 (9th Cir. 1997) (rejecting the argument that a claim based on unilateral refusals to deal by monopolist must be controlled by the essential facilities doctrine and holding that section 2 "prohibits a monopolist from refusing to deal in order to create or maintain a monopoly absent a legitimate business justification"); Data Gen. v. Grumman Sys. Corp., 36 F.3d 1147, 1183-84 (1st Cir. 1994) (holding that a section 2 refusal-to-deal claim need not conform to the essential facilities doctrine).

195. See United States v. Terminal R.R. Ass'n, 224 U.S. 383 (1912).

196. See Otter Tail Power Co. v. United States, 410 U.S. 366 (1973).

197. See HOVENKAMP, ANTITRUST POLICY, supra note 3, at 275 ("The courts have generally interpreted the essential facilities doctrine to require a showing that no practical alternatives are available, including alternatives that entail cost disadvantages."). See MCI Communications Corp. v. AT&T Co., 708 F.2d 1081 (7th Cir.), cert. denied 464 U.S. 891 (1983).

198. See Carribean Broad. Sys. v. Cable & Wireless PLC, 148 F.3d 1080, 1088 (D.C. Cir. 1998) ("[T]he elements of an antitrust claim for denial of access to an essential facility are: (1) a monopolist who competes with the plaintiff controls an essential facility; (2) the plaintiff cannot duplicate that facility; (3) the monopolist denied plaintiff the use of the facility; and (4) the monopolist could have granted the plaintiff use of the facility."); Blue Cross & Blue Shield United of Wis. v. Marshfield Clinic, 65 F.3d 1406, 1412 (7th Cir. 1995) (Posner, J.) ("[T]he concept of essential or bottleneck facilities has been used from time to time to require a natural monopolist to cooperate with would-be competitors."); Alaska Airlines Inc. v. United Airlines, Inc., 948 F.2d 536, 544 (1991) ("A facility that is controlled by a single firm will be considered 'essential' only if control of the facility carries with it the power to eliminate competition in the downstream market" and such power is "relatively permanent" rather than momentary.); MCI v. AT&T, 708 F.2d at 1132-33.

199. That is to say, because compulsory access doctrines go to the heart of the core statutory right to control copies, invocation of the doctrine would alter the implied statutory structure of returns and costs. McGowan, supra note 95, at 834. Because the copyright grant itself is the barrier to replication in such cases the question whether software is a natural monopoly is of heuristic interest and may be necessary to interpretation of the doctrine in the view of some judges, but is not necessary to resolution of these issues. The court in David L. Aldridge Co. v. Microsoft Corp., 995 F. Supp 728, 751-55 (S.D. Tex 1998), appeared to assume that operating system software could be an essential facility; the court granted summary judgement for Microsoft on the essential facilities claim without addressing copyright rate of return issues.

200. See 15 U.S.C. § 15.

201. See, e.g., SULLIVAN & HOVENKAMP, supra note 132, at 166-68; Hovenkamp, Protected Classes, supra note 157; Herbert Hovenkamp, Treble Damages Reform, 33 ANTITRUST BULL. 233 (1988).

202. See Kaplow, supra note 160, at 1840 ("In general, setting the patent life and determining patent-antitrust doctrine are interdependent endeavors; in other words, the system of equations that defines the optimization process must be solved simultaneously.").

203. I would speculate that a greater number of patents create market power in an antitrust sense than do copyrights, as the example of Time and Newsweek suggests, though I cannot prove the speculation and, as software becomes an integral part of more goods than it has in the past, the economic strength of at least software copyrights may be increasing relative to the implied economic power of copyrights in other products. The increasing number of software copyright misuse case may reflect the increasing ability of copyright to create barriers to competition previously seen only in patents. Cf. Reed-Union Corp. v. Turtle Wax, Inc., 77 F.3d 909, 913 (7th Cir. 1996) (Easterbrook, J.) ("[C]opyrights do not exclude independent expression and therefore create less market power than patents.").

204. Cf. Kaplow, supra note 160, at 1834 (noting that "there is ... insufficient information to determine any component of the patent-antitrust doctrine unless one also knows the ratio [of gains to patentees and social losses] implicit in the optimal patent life. Yet our knowledge is inadequate to inspire great confidence even in the desirability of having a patent system at all, much less in the ability to make the subtle measurements of marginal effects that determine the ratio implicit in the optimal patent life"); id. at 1888 ("[T]here is no way of knowing whether the current level of reward provided by the combination of the patent system and the patent-antitrust doctrine is anywhere near the optimal level.").

205. To some extent, of course, this distinction is semantic. If a court could measure social costs and benefits directly and conclude that a given practice imposes greater marginal costs than benefits, and if both copyright and antitrust sought to maximize production of creative work at the lowest cost, one could classify the analysis within the taxonomy of the law either as one of either copyright or antitrust. Different classifications would be meaningful for purposes of standing to bring an action and damages, which might well effect the degree to which a decision achieved an optimal outcome, but the core methodology might well be the same. This is one implication of conceiving of copyright as a method of ameliorating market failure (public goods) limited in scope such that marginal benefits exceeded costs. Analysts might well differ, however, on the question whether the copyright regime we actually have matches these parameters, or is even intended to approximate them.

206. See Kaplow, supra note 160, at 1848-49. The approach in the text, which is one of Professor Kaplow's examples of a formal approach, is analogous to Professor Baxter's inquiry into whether a premium derived from patent exploitation "constitute[s] income of the kind contemplated by the patent system." William F. Baxter, Legal Restrictions On Exploitation of the Patent Monopoly: An Economic Analysis, 76 YALE L.J. 267, 343 (1966).

207. In other words, if competitors and consumers had the right freely to copy or manipulate Microsoft's products. For more on the per-processor example, see United States v. Microsoft Corp., 159 F.R.D. 318, 323 (D.D.C.), rev'd 56 F.3d 1448 (D.C. Cir. 1995). For alternative interpretations of this issue, see Kenneth C. Baseman et al., Microsoft Plays Hardball: The Use of Exclusionary Pricing and Technical Incompatibility to Maintain Power in Markets for Operating System Software, 40 A NTITRUST BULL. 265, 267-68 (1995) (criticizing per-processor licenses); Robert J. Levinson, Efficiency Lost?: The Microsoft Consent Decree, in THE ECONOMICS OF THE ANTITRUST PROCESS 175, 182-85 (Malcolm B. Coate & Andrew N. Kleit eds., 1996) (suggesting that willing acceptance of such terms by some OEMs vitiates inference of competitive harm).

208. OEM's, for example, would have had no incentive to accede to license terms that, after all, reduced their ability to play competitors off against one another, if they could have freely copied Microsoft's code. Of course, if that were the case OEMs would have had no incentive to agree to any terms at all, in which case Microsoft might have had no incentive to write the code, bringing us back to fundamental copyright principles.

209. One additional caveat is in order. Given the realities of the legislative process it may well be that under the current copyright regime marginal social costs exceed marginal social benefits. As noted above, at least with respect to software, copyright protections are suspect on this count. But if Congress has enacted legislation creating losses disproportionate to gains, I do not believe antitrust claims may be employed to move copyright protection away from the regime Congress gave us, even if such moves enhance social welfare.

210. For those courts that appear to view essential facilities claims as requiring the presence of a natural monopoly, see, for example, Blue Cross & Blue Shield United of Wis. v. Marshfield Clinic, 65 F.3d 1406, 1412 (7th Cir. 1995), an essential facilities claim against a firm whose market position rests on intellectual property rights would be particularly troubling. If intellectual property rights create a monopoly one might well argue that it was socially constructed-instrumental rather than natural. A court might understandably be more reluctant to reach a natural monopoly conclusion regarding firms whose market position rested on rate-of-return statutes such as the patent or copyright laws than it would with respect to firms such as local power distributors or local telephone companies.

211. See Intergraph Corp. v. Intel Corp., 3 F. Supp. 2d 1255, 1262 (N.D. Ala 1998).

212. See Bristol Technology, supra note 29, at ¶¶ 49-60.

213. See, e.g., Digital Equip. Corp. v. Uniq Digital Tech., Inc., 73 F.3d 756, 763 (7th Cir. 1996) (Easterbrook, J.) ("This is a mundane commercial case, in which a buyer has used the antitrust laws to postpone paying its debts.").

214. See SULLIVAN & HOVENKAMP, supra note 132, at 34.

215. Cf. Olympia Equiptment Leasing Co v. Western Union Telegraph Co., 797 F.2d 370, 376 (7th Cir. 1986) ("If a monopolist does extend a helping hand, though not required to do so, and later withdraws it ... does he incur antitrust liability? We think not. Conceivably, he may be liable in tort or contract law, under theories of equitable or promissory estoppel or implied contract ....").

216. To reiterate, none of this suggests that cases in which a claim is based in part on negotiating tactics or contract terms are immune from antitrust scrutiny. Some claims, such as the coercive reciprocity theory alleged in Intergraph, as well as tying and exclusive dealing theories, are of course based on economic consequences produced by contract terms. In such cases the economic consequence must be evaluated under antitrust law (using an allocative efficiency standard) regardless whether the concerns of contract law are satisfied.