Legal coding strategies extend intellectual property rights' life span, balancing innovation promotion and knowledge access while potentially enabling monopoly abuse.

Legal coding strategies can be employed to prolong the life span of intellectual property rights (IPRs) by altering features of the original invention or recoding them with legal modules that do not have an expiration date, such as trade secrecy law. Most IPRs have a limited duration, but there are ways to extend their life span and maintain the wealth they generate. One example of this is the pharmaceutical industry, where companies often make minor alterations to their patented drugs to extend their patent protection. This practice, known as "evergreening," allows companies to maintain their monopoly on a drug and continue to profit from it even after the original patent has expired. In some cases, companies may also use trade secrecy law to protect their valuable know-how and processes, ensuring that competitors cannot access or replicate their innovations. Another example is the case of Myriad Genetics, a biotech company that held patents on the BRCA1 and BRCA2 genes, which are associated with an increased risk of breast and ovarian cancer. The company's patents allowed them to maintain a monopoly on genetic testing for these genes, but the US Supreme Court eventually ruled that naturally occurring DNA sequences could not be patented. However, Myriad was able to maintain some of its monopoly by altering its testing methods and relying on other legal protections, such as trade secrecy law. These examples demonstrate how legal coding strategies can be used to prolong the life span of IPRs and maintain the wealth they generate. However, this practice can also raise concerns about the balance between promoting innovation and ensuring access to knowledge and resources, as well as the potential for abuse of monopoly power.

The legal coding of capital shapes wealth creation and distribution, often hidden within complex legal frameworks and private law firms.

Law plays a crucial role in organizing modern society and markets by creating the conditions for realizing individual and social aspirations. It serves as a foundation for both preference aggregating machines in systems where efficiency is prioritized and autonomous individuals in deliberative polities where reason, not just money, rules. Through law, societies commit to preserving formal rights, insulating them from political contestation, and subordinating them to the market. This legal framework also has the potential to transform transitory rights into instruments of change. The legal code is essential for the creation and distribution of wealth in society. It confers attributes that greatly enhance the prospects of some assets and their respective owners to amass wealth, relative to others—an exorbitant privilege. Choosing the assets and grafting onto them the legal attributes of priority, durability, universality, and convertibility is tantamount to controlling the levers for the distribution of wealth in society. States and state law are central to the coding of capital. States have not only dismantled existing rights and privileges to make room for the power of market forces, but they have also offered their coercive powers to enforce legal modules. This process is both decentralized and increasingly global, with private attorneys performing most of the work on behalf of their clients. As a result, many polities have lost the ability to control the creation and distribution of wealth. The legal order that sustains global capitalism in the absence of a global state or a global legal system is complex and hidden in arcane statutory or case law. The plot frequently develops behind the closed doors of large law firms, with only a rare airing in a court of law or parliament. This account contradicts the standard argument that capitalist economies are defined by free markets that allocate scarce resources efficiently and that prices reflect the fundamental value of assets. Instead, the legal coding accounts for the value of assets, and thus for the creation of wealth and its distribution.

The legal order sustaining global capitalism is a decentralized patchwork of domestic laws and international treaties, shaping the distribution of wealth and power in society.

Global capitalism exists and thrives without a global state or legal system due to a legal order that supports it. This legal order is a patchwork of select domestic laws and international treaties, which are recognized and enforced by states. The legal structures of capital play a crucial role in understanding the distribution of wealth and power in society. The legal order sustaining global capitalism is reminiscent of empires, where law extends to people and territories in faraway places. This empire of law consists of select domestic laws, such as those of England and New York State, and a few international treaties. These laws are knit together by rules that ensure their recognition and enforcement in other jurisdictions. This decentralized nature of law allows global commerce and finance to thrive without a global state or law, enabling those in the know to pick and choose the rules that best suit their interests. The historical precedent for global rule by one or several powers is empire. Law's empire relies on the normative authority of the law, with its most powerful battle cry being "but it is legal." States offer their laws to foreign asset holders and lease their courts to enforce foreign law as if it were home-grown, even if this deprives them of tax revenue or the ability to implement the policy preferences of their own citizens. The legal order that sustains global capitalism is the backbone for its existence and explains why merchants no longer have to venture home to protect their spoils. This legal infrastructure is central to the rise of capitalism and is ultimately backed by states. Many states have committed themselves under their own domestic law or in international treaties to recognize the priority rights created under foreign law. They regularly enforce foreign law in their own courts and lend their coercive powers to executing the rulings of foreign courts or arbitration tribunals. In conclusion, the legal order sustaining global capitalism in the absence of a global state or legal system is a complex and decentralized patchwork of domestic laws and international treaties. This legal infrastructure is crucial for understanding the distribution of wealth and power in society and is central to the rise and continued existence of capitalism.

The global legal profession's mastery of code reshapes capital distribution and influences wealth in society.

The rise of the global legal profession as masters of the code has significantly impacted the coding of capital and the distribution of wealth in society. These legal professionals, often trained at elite law schools, are recruited by top law firms and, after years of learning the tools of the trade and logging long hours, advance to become partners. They are incredibly smart and hardworking, viewing themselves as servants of their clients rather than masters in their own right. Their job is to ensure that clients can achieve their business goals without getting into conflict with the law. The global legal profession has expanded rapidly, with most global law firms located in the United States and the United Kingdom, although their number in China is on the rise. Among the top global law firms, there are only a few from France and Germany, indicating the dominance of Anglo-Saxon legal practice in the global arena. Lawyers in the global legal profession are not just legal service providers; they actively fashion new law from existing legal material, using their expert legal knowledge to identify opportunities for legal innovation while also guarding against legal risk. They don't just use and apply existing law; they actively create new capital and often make new law in the process. The rise of the global legal profession has transformed the relationship between lawyers and states. Lawyers now have more latitude in crafting new capital by grafting the modules of the legal code onto an ever-changing roster of assets. However, they still need to ensure that their coding efforts will be recognized and enforced by some state, as it is the shadow of coercive law enforcement that makes the commitments they craft credible and scalable. In conclusion, the rise of the global legal profession as masters of the code has significantly impacted the coding of capital and the distribution of wealth in society. These legal professionals, often trained at elite law schools and working for top law firms, play a crucial role in shaping the legal landscape and creating new capital through their expert knowledge and innovative strategies.

Home

The Code of Capital - Book Summary (2024)

Katharina Pistor

The Code of Capital explores how law and legal institutions play a crucial role in creating wealth and inequality by transforming ordinary assets into capital, using legal modules such as property rights, collateral, trust, corporate, and bankruptcy law.

Key Ideas

Law serves as the source code for transforming intangible assets into capital by utilizing legal modules such as property rights, collateral, trust, corporate, bankruptcy law, and contract law. These modules bestow critical legal attributes on select assets, giving them a comparative advantage over others in creating new and protecting old wealth. Once properly coded, capital assets enjoy priority, durability, convertibility into cash, and universality, which are enforced by states.

The roster of assets coded in law has evolved over time, moving from land to corporate shares, bonds, and intellectual property rights. Land, for instance, produces food and shelter even in the absence of legal coding, but financial instruments and intellectual property rights exist only in law. The legal devices used for coding these assets have remained remarkably constant over time.

An example of the power of legal coding can be seen in the rise of intellectual property rights over the last few decades. These rights now account for the lion's share of the market valuation of many firms. By grafting the modules of the legal code onto an asset, its holder obtains a right over and above others, enjoying greater durability and fewer obstacles to lock in past gains by converting them into state-backed currency.

In the case of Haskel and Westlake's book "Capitalism without Capital," the authors discuss the increasing importance of intangible assets in the economy but hesitate to acknowledge the central role of law in coding capital. By recognizing that capital is made and not simply the product of superior skills, attention shifts to the processes by which different assets are slated for legal coding and to the states that endorse relevant legal modules and offer their coercive powers to enforce them.

The Code of Capital by Katharina Pistor explores how law plays a crucial role in creating wealth and inequality. The author argues that capital is coded in law, specifically in private law institutions such as property, collateral, trust, corporate, bankruptcy law, and contracts. By using these legal modules, private attorneys can transform ordinary assets into capital, giving their clients a comparative advantage over others. The book also highlights the role of lawyers as the masters of the code, shaping the distribution of wealth in society.

Here are 10 main facts and actions to deepen the knowledge and implement the learnings from the book:

Understand that capital is not a physical thing but a legal coding that bestows priority, durability, universality, and convertibility on assets.
Recognize the importance of private law institutions, such as property, collateral, trust, corporate, bankruptcy law, and contracts, in coding capital.
Learn about the historical evolution of legal coding, starting with land, moving on to firms, debt, and knowledge, and how these assets have been transformed into capital.
Acknowledge the role of lawyers as the masters of the code, using their legal expertise to create new capital and shape the distribution of wealth in society.
Be aware of the global legal order that sustains capitalism, even in the absence of a global state or legal system.
Consider the potential impact of digital coding on the future of capital and the role of lawyers in this new landscape.
Reflect on the political and normative implications of the decentralized process of coding capital, which raises questions about access to and distribution of legal coding powers.
Examine the relationship between the coding of capital and rising levels of inequality, as well as the challenges in addressing this issue through conventional forms of redistribution, such as taxes.
Explore the role of states and their agents, such as courts and regulators, in supporting or breaking down barriers to new coding strategies.
Consider the potential for alternative coding systems or reforms to address the issues of wealth and inequality raised by the current legal coding of capital.