Optimal Copyright Protection: Civil Law vs. Criminal Law

Abstract

We consider optimal copyright protection strategies from the government and producer perspectives. Our model assumes that the government sets the penalty for infringement, and that the producer is responsible for monitoring illegal activity. We find that depending on the production cost of the goods, the government should set copyright penalties either to zero or to a level that makes the producer's profit zero. We also show that the social surplus is greater under a civil law scheme than a criminal law scheme when the production cost of the goods is high. On the other hand, it is better to apply penalties under criminal law when the production cost is low.