Civil and criminal penalties for copyright infringement

Copyright violations are subject to both civil and criminal sanctions, but criminal charges are relatively rare. Using a theoretical model, this study compares the implications of civil and criminal penalty schemes from the viewpoint of social welfare, where civil and criminal schemes are distinguished by whether penalties are paid to the copyright holder or the government. The analysis suggests that when the costs of developing a copyrighted product are low, the socially most desirable scheme is one in which there are no civil penalties and criminal penalties are low. Although very severe criminal penalties may lead to the complete elimination of copyright infringements, they could also result in excessive monopoly profits for the producer of the copyrighted good. A further finding is that the number of copyright infringements is smaller under the criminal than the civil law scheme.

► Copyright violations are subject to both civil and criminal sanctions. ► I compare the two penalty schemes from the viewpoint of social welfare. ► I show that criminal penalty is socially desirable when the development cost is low. ► The number of illegal use is smaller under the criminal than the civil law scheme.