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Abstract: This article presents a new theory of patent value, responding to growing empirical evidence that the traditional appropriability premise of patents is fundamentally incomplete in the modern innovation environment. We find that for patents, the whole is greater than the sum of its parts: the true value of patents lies not in their individual worth, but in their aggregation into a collection of related patents, a patent portfolio. The patent portfolio theory thus explains what is known as the patent paradox: in recent years patent intensity - patents obtained per research and development dollar - has risen dramatically even as the expected value of individual patents has diminished. We find the benefits of patent portfolios to be so significant as to suggest that firms' patenting decisions are essentially unrelated to the expected value of individual patents; because patent portfolios simultaneously increase both the scale and the diversity of available marketplace protections for innovations, firms will typically seek to obtain a large quantity of related patents, rather than evaluating their actual worth. The result - which we find widely recognized in commercial circles - is that the modern patenting environment exhibits (and requires) a high-volume, portfolio-based approach that is at odds with scholars' traditional assumptions. The implications of the portfolio theory of patents are important and widespread. First, the explanatory power of the theory allows resolution of not only the patent paradox, but many of the otherwise-puzzling observable patterns in the modern patenting environment - such as firm-size differences in patent intensity and litigation rates. Second, the patent portfolio theory neatly complements the prior theories that have sought to explain modern patent value, strengthening their relationship with the reality of patenting behavior - and confirming that the value of patents has expanded beyond traditionalist notions. Third, the patent portfolio theory allows a number of important predictive insights into future trends in the patent system, allowing policymakers and scholars to frame their inquiry within a range of likely outcomes. In our analysis, the patent portfolio theory does not suggest a better, brighter future for the patent system, but does build a foundation for the important academic and policy-related work that springs from this initial treatment.
patents, patent value, portfolios, patent theory, patent paradox
Abstract: This article presents a new theory of patent value, responding to growing empirical evidence that the traditional appropriability premise of patents is fundamentally incomplete in the modern innovation environment. We find that for patents, the whole is greater than the sum of its parts: the true value of patents lies not in their individual worth, but in their aggregation into a collection of related patents, a patent portfolio. The patent portfolio theory thus explains what is known as "the patent paradox": in recent years patent intensity - patents obtained per research and development dollar - has risen dramatically even as the expected value of individual patents has diminished. We find the benefits of patent portfolios to be so significant as to suggest that firms' patenting decisions are essentially unrelated to the expected value of individual patents; because patent portfolios simultaneously increase both the scale and the diversity of available marketplace protections for innovations, firms will typically seek to obtain a large quantity of related patents, rather than evaluating their actual worth. The result - which we find widely recognized in commercial circles - is that the modern patenting environment exhibits (and requires) a high-volume, portfolio-based approach that is at odds with scholars' traditional assumptions. The implications of the portfolio theory of patents are important and widespread. First, the explanatory power of the theory allows resolution of not only the patent paradox, but many of the otherwise-puzzling observable patterns in the modern patenting environment - such as firm-size differences in patent intensity and litigation rates. Second, the patent portfolio theory neatly complements the prior theories that have sought to explain modern patent value, strengthening their relationship with the reality of patenting behavior - and confirming that the value of patents has expanded beyond traditionalist notions. Third, the patent portfolio theory allows a number of important predictive insights into future trends in the patent system, allowing policymakers and scholars to frame their inquiry within a range of likely outcomes. In our analysis, the patent portfolio theory does not suggest a better, brighter future for the patent system, but does build a foundation for the important academic and policy-related work that springs from this initial treatment.
Abstract: This Article posits that the essential role of securities regulations is to create a competitive market for information traders (analysts). The Article advances two related theses - one descriptive and the other normative. Descriptively, it demonstrates that securities regulation is specifically designed to facilitate and protect the work of analysts. Normatively, the Article shows that analysts are the only group that can best underwrite efficient and liquid capital markets and, hence, it is the group securities regulation should strive to protect. By protecting analysts, securities regulations enhance efficiency and liquidity in financial markets. This protection, in turn, benefits other types of investors by reducing transaction costs. Furthermore, by protecting analysts, securities regulation represents the highest form of market integrity by ensuring accurate pricing to all investors, and improves the allocation of resources in the economy.
Securities regulation may be divided into three broad categories: disclosure duties; restrictions on fraud and manipulation; and restrictions on insider trading - each of which contributes to the creation of a vibrant market for analysts. Disclosure duties reduce analysts - costs of gathering information, and diminish the ability of analysts to produce biased analyses in exchange for pay. Restrictions on fraud and manipulation lower analysts' cost of verifying the credibility of information, and enhance analysts' ability to make accurate predictions. Finally, restrictions on insider trading protect analysts from competition from insiders that would undercut the ability of analysts to recoup their investment in information, and thereby drive analysts out of the market. Thus, the effect of securities regulation is to develop and secure a competitive market for analysts.
Moreover, a competitive market for analysts reduces management agency costs. While courts can discern fraud or illegal transfers, they are ill-equipped to evaluate the quality of business decisions. Judicial oversight can curtail breaches of the duty of loyalty but not breaches of the duty of care; the tasks of curbing breaches of the duty of care and restraining inefficient investments are performed by analysts. Furthermore, a competitive analysts' market generates positive externalities for the rest of the economy by improving the information market and facilitating the operations of the investment banking industry.
Our account has important implications for several policy debates. First, our account supports the system of mandatory disclosure. We show that while market forces may provide management with an adequate incentive to disclose at the initial public offering (IPO) stage, they cannot be relied on to effect optimal disclosure thereafter. Second, our analysis categorically rejects the calls to limit disclosure duties to hard information and self-dealing by management. Third, our analysis supports the use of the fraud-on-the-market presumption in all fraud cases regardless of how efficient financial markets are. Fourth, our analysis suggests that in cases involving corporate misstatements, the appropriate standard of care should, in principle, be negligence, not fraud.
fraud on the market, mandatory disclosure, efficient market, agency cost, Information asymmetry, information externalities, buy-side analysts, sell-side analysts, accurate pricing, liquidity, insider trading, fraud and manipulation, governance structure
Abstract: Property law has eluded both a consistent definition and a unified conceptual framework. Instrumentalists insist that property is nothing more than default contract rules. Conceptualists proclaim the primacy of in rem conceptualization and of specially privileged rights such as the rights to exclude. Others think of property as an infinitely malleable bundle of sticks.
We demonstrate that any comprehensive property theory must address four legal questions: (1) What things are protected by property law; (2) vis-a-vis whom; (3) with what rights; and (4) enforced by what mechanism. Then, we introduce a value-oriented theory to show how property law answers these questions by recognizing and helping to create stable relationships between persons and assets, allowing owners to extract otherwise unavailable utility.
Our approach illuminates recent property developments, and demonstrates the need for reform. Additionally, we demonstrate the need for property occasionally to yield to other legal fields like secured transactions.
Property
Abstract: In this Essay, we present a brand new efficiency-based justification for the ban on insider trading. Adopting a broad-market approach to the problem enables us to transform conventional theorizing - which suggests that property rights in inside information must be allocated within the firm, either to shareholders or to managers - and present a third, superior option: allocating the property right to market analysts. This new conceptualization of the problem enables one to see that the crucial issue underlying insider trading policy is: which group-insiders or market analysts can best provide efficiency and liquidity to financial markets? We argue, contrary to the accepted lore, that market analysts are superior to insiders in providing efficiency and liquidity to financial markets. Although insiders have ready access to inside information, they are isolated from external competition, and thus, if allowed to exploit this information through trade, they would seek to preserve and exploit their market power over inside information. Analysts, on the other hand, operate in a fiercely competitive environment, and, thus, process new information to the market as expeditiously as possible. Furthermore, because analysts possess greater financial resources, are able to diversify their investments, and frequently diverge in assessing stock prices, they also provide superior liquidity to financial markets. Moreover, we show, for the first time, that competition among analysts generates a myriad of positive externalities for the economy. Competition among analysts is responsible for the burgeoning market for financial information, and the welter of financial media to which we are exposed. In addition, the analysts' market creates economies of scale for the investment banking industry as a result of continuous monitoring and pricing of stocks, attracting many foreign companies to list their shares on U.S. capital markets. None of this would occur if insiders were allowed to trade. Because of their ready access to inside information, insiders would consistently beat analysts when competing against them, eventually driving analysts out of the market. Given the substantial benefits derived from competition among analysts, we submit that insiders should be banned from appropriating inside information; or as we suggest, they should be assigned, what we call, a negative property right in inside information to allow a competitive information market to develop. We believe that the novel theorizing we develop presents a compelling economic case for retaining the prohibition on insider trading. Finally, our broad market analysis provides a comprehensive analytic framework for analyzing the efficiency tradeoffs implicated by two unresolved aspects of insider trading: selective disclosure and warehousing.
Abstract: This Article addresses a curious gap in the theory of intellectual property. One of the central dogmas in both the legal and economic literatures is that patents, copyrights and trademarks constitute separate forms of protection, each serving different purposes and designed to operate independently of the others. By challenging this dogma, however, this Article shows that certain combinations of intellectual property protection give rise to important synergies. When a patentee can develop brand loyalty among its customers, the existence of trademark protection allows her to extend its protection even after her patent expires, and thereby earn higher profits than would be possible without such leverage. Paradoxically, our model reveals that this patent/trademark leverage is actually efficiency-enhancing: it gives patentees an incentive to price less monopolistically than they would if their protection terminated upon the expiration of the patent. Importantly, this is not a purely theoretical result: several case studies demonstrate that firms actually do combine patent and trademark protection in much the way we describe. We show that the same synergies are at work when trade-secrecy is combined with trademark protection. The unique perspective we develop in the Article has important descriptive, normative, and methodological implications. Descriptively, we show that the deadweight loss of patent and trade secrecy protection is lower than is commonly believed, and that incentives to innovate are higher. Normatively, we call for a reversal of the prevailing judicial hostility to combining patent and trademark protection, and explain how the law can take advantage of leveraged patents to improve the tradeoff between dynamic and static efficiencies in innovation policy. For example, we demonstrate how policymakers can shorten patent protection, while simultaneously increasing incentives to innovate. Moreover, we design a separating mechanism that accomplishes this desirable result without imposing undue informational burdens on policymakers. Finally, we highlight the need for an integrated analysis of intellectual property. When synergies exist, exclusive focus on the parts often leads to an incomplete and distorted perception of the whole.
Abstract: Arrow's disclosure paradox implies that information that is not afforded legal protection cannot be bought or sold on the market. This paper emphasizes the important relationship between the paradox of disclosure and the boundaries of the firm question. Only legally protected inventions, i.e., patented inventions, may be traded; pre-patent stages of the innovation process may not. Consequently, by force of law, rather than by the guidance of economic principle, pre-patent innovation must be carried out within the boundaries of a single firm.
Boundaries of the firm, disclosure paradox, intellectual property law
Abstract: This Essay demonstrates the strategic advantage of narrow patents and unprotected publication of R&D output. Broad patents might stifle follow-on improvements by deterring potential cumulative innovators, who fear being held up by the initial inventor at the ex post licensing stage. By opting for a narrower patent and unprotected publication, the initial patent holder commits not to hold up follow-on inventors, thus promoting sequential innovation and generating lucrative licensing fees. Counterintuitively, in cumulative innovation settings, less protection benefits the patentee. This finding may serve as a counter-force to the much-lamented "anti-commons" problem. More generally, our theory demonstrates that the divergence between private interests and social objectives - on both the static and dynamic dimensions of intellectual property - is not as great as conventionally believed. Our theory bridges yet another gap; that between the two main theoretic strands in patent law scholarship - the property rights perspective and the information revelation perspective. It also explains the recent trend toward unprotected publication of information. Finally, we propose an important reform of the novelty requirement in patent law that would further encourage narrow patents and unprotected publication by bolstering the credibility of a patentees commitment not to patent previously published research findings.
Patents, Intellectual Property, Cumulative Innovation, Publication, Licensing, Hold-up
Abstract: In this Article, we introduce the concept of anti-property - a private conservation mechanism that allows only socially desirable development. Our mechanism utilizes veto rights to create a collective holdout dynamic that thwarts undesirable uses of conservation commons. We demonstrate, counterintuitively, that when transaction costs systematically bias the market against conservation, the best response may be to create countervailing transaction costs. We also show how the combination of a private anti-property mechanism with a carefully designed takings law may result in an optimal balance between conservation and development.
property, conservation, preservation, commons, anticommons
Abstract: Patent thickets may inefficient retard cumulative innovation. This paper explores two alternative mechanisms that may be used to weed out patent thickets. Both mechanisms are intended to reduce the number of patents in our society. The first mechanism we discuss is price based regulation of patents through a system of increasing renewal fees. The second and more innovative mechanism is quantity based regulation through the establishment of a system of Tradable Patent Rights. The formalization of tradable patent rights would essentially create a secondary market for patent permits in which patent protection will be bought and sold.
permits, thickets, license fees, licensing, social costs, infringement, renewal fees, tragedy of the commons, enforcement
Abstract: The Supreme Court decision of Kelo v. City of New London has been denounced by legal scholars from the entire political spectrum and given rise to numerous legislative proposals to reverse Kelo's deferential interpretation of the Public Use Clause of the Fifth Amendment, and instead, limit the use of eminent domain when taken property is transferred to private hands. In this Essay we argue that the criticisms of Kelo are ill-conceived and misguided. They are based on a narrow analysis of eminent domain that fails to take into account the full panoply of government powers with respect to property. Given that the government can achieve any land use goals through the powers of regulation and taxation without paying compensation to the aggrieved property owner, eminent domain is the government power least pernicious to property owners as it is the only one that guarantees them compensation. An important and counter-intuitive implication of this insight is that the calls to restrict the government ability to use eminent domain by narrowly construing public use are going to harm, rather than help private property owners.
The Essay then poses the intriguing question: why does the government ever choose to pay compensation? To answer this question we develop a model of political decisionmaking with respect to land use. Our model enables us to elucidate the political calculus that governs the compensation decision and to specify the conditions under which political decisionmakers will elect to pay compensation regardless of the policy instrument chosen.
takings, eminent domain, public use, just compensation, public choice, political cost-benefit analysis, judicial deference, property regulation, property rights, political decisionmaking
Abstract: Givings - government acts that enhance property value - are omnipresent. Givings and takings are mirror images of one another, and of equal practical and theoretical importance, but the Takings Clause of the Fifth Amendment has enabled takings to dominate scholarly attention. This Article makes the first step toward rectifying this disparate treatment by laying the foundation for a law of givings.
The Article identifies three prototype givings: physical givings, regulatory givings and derivative givings. The Article shows that givings are a formative force in property, and that a comprehensive takings jurisprudence cannot be devised without an attendant understanding of givings and their relationship to takings.
The Article turns to the task of determining when a giving occurs, and when a "fair charge" - the givings' analogue of "just compensation" - should be assessed on the beneficiaries. By extracting the essential features of takings law, the Article molds the universe of givings into four conceptual clusters. The first cluster is organized around determining when and whether givings can be characterized as reverse takings. The second separates between singled-out givings and majoritarian givings. The third distinguishes between refusable and nonrefusable givings. The fourth differentiates between givings directly linked to particular takings and givings that are not. Finally, the Article offers a three-step model for identifying, assessing, and charging for givings, thereby demonstrating the practical administrability of a law of givings.
The Article argues that charging for givings would reduce interest group politics, enhance the efficiency of government and improve the fairness of the property system.
Abstract: In this Article, we demonstrate that every property question invariably involves three distinct dimensions: (1) the number of owners, (2) the scope of owner's dominion and (3) asset configuration. Furthermore, we claim that the interplay among the three dimensions shapes the field of property and holds the key to understanding the deep structure of property law. On this view, property law is a balancing act that requires policymakers and private actors to constantly juggle the often-conflicting demands lying along these three dimensions.
The three-dimensional account of property we develop in this Article has important descriptive and normative implications. Descriptively, we show that property law accommodates conflicts by using as many as six different strategies to maximize efficiency over the three dimensions. Furthermore, we demonstrate that all property doctrines fall under one of the six strategies we enumerate. Accordingly, the Article offers a coherent and comprehensive descriptive account of the field.
Normatively, our three-dimensional approach offers a wide array of new policy responses to property challenges. It suggests that every property challenge may be addressed on any one (or more) of the three dimensions. This opens the door to new proposals for resolving such diverse long standing property challenges as managing property rights in tribal land and conservation properties, optimizing access to coastal land, and regulating environmental liability and intellectual property.
property rights, property doctrines, maximizing efficiency, strategies, aggregation, disaggregation, reconfiguration, commons
Abstract: The doctrine of fair use was originally intended to facilitate those socially optimal uses of copyrighted material that would otherwise constitute infringement. Yet the application of the law has become so unpredictable that would-be fair-users can rarely rely on the doctrine with any significant level of confidence. Moreover, the doctrine provides no defense for those seeking to make fair uses of material protected by anti-circumvention measures. As a result, artists working in media both new and old are unable to derive from copyrighted works the full value to which the public is entitled. In this Essay, we propose a solution to the uncertainty and unpredictability that plague the doctrine: nonexclusive safe harbors that define minimum levels of copying as per se fair uses. These bright-line rules would provide the clarity needed to facilitate countless productive uses that are currently being chilled. Furthermore, by providing an ex ante test for identifying uses as fair, these safe harbors provide a framework for salvaging fair use in the digital age.
copyright, anti-circumvention measures, bright line rules, fair use, DMCA, Digital Millenium Copyright Act, rules versus vs. standards, safe harbor
Abstract: The small village of Cheshire, Ohio was recently acquired in its entirety by the firm whose giant power plant, located at the edge of town, caused it serious pollution problems. Although the plant was worth substantially more than the town, this was not a simple Coasean bargain. This paper combines an ethnographic methodology with theoretical insights from law and economics to present an empirical and theoretic challenge to the standard account of nuisance disputes. We explore the transaction in detail and explain what prevented collective action and holdout problems that are usually thought to hinder bargaining with groups. Specifically, we show how incorporating the role of community into conventional theory offers a new understanding of the likelihood of holdouts, the importance of community dynamics, the interdependency of community-wide nuisance actions, and the role of the law of takings.
pollution, nuisance, property, torts, community, externalities, takings
Abstract: In light of the expansive interpretation of the public use requirement, the payment of just compensation remains the only meaningful limit on the government's eminent domain power and, correspondingly, the only safeguard of private property owners' rights against abusive takings. Yet, the current compensation regime is suboptimal. While both efficiency and fairness require paying full compensation for seizures by eminent domain, current law limits the compensation to market value. Despite the virtual consensus about the inadequacy of market compensation, courts adhere to it for a purely practical reason: there is no way to measure the true subjective value of property to its owner. Subjective value is neither observable nor verifiable to third parties and courts cannot rely upon owners' reports of the value they attach to their properties. To date, the challenge of screening truthful from exaggerated evaluation has proven insurmountable.
This Article solves the undercompensation conundrum. It offers a novel self-assessment mechanism that enables the payment of full compensation at subjective value when private property is taken by eminent domain. Under the proposed mechanism, property owners would get to set the price of the property designated for condemnation. The government could then either take the property at the designated price, or abstain, leaving the property subject to two new proposed restrictions. First, for the life of the owner, the property could not be sold for less than the self-assessed price, adjusted on the basis of the local housing price index. Second, the self-assessed price - discounted to take account of the peculiarities of property tax assessments - would become the new benchmark for the owner's property tax liability.
The Article shows that under most conditions, these restrictions will induce honest reporting by owners, while reducing the transaction costs created by the compensation process. The result is a dramatically more efficient law of eminent domain that is also far more respectful of private property rights.
takings, compensation, eminent domain, self-assessment, just compensation, alienability, property tax, tax assessments
Abstract: This Essay exposes and analyzes a hitherto overlooked cost of the current design of tort law: its adverse effect on innovation. Tort liability for negligence, defective products, and medical malpractice is determined by reference to custom. We demonstrate that courts' reliance on custom and conventional technologies as the benchmark of liability chills innovation and distorts its path. Specifically, the recourse to custom taxes innovators and subsidizes replicators of conventional technologies. We explore the causes and consequences of this phenomenon and propose two possible ways to modify tort law in order to make it more welcoming to innovation.
law & technology, science & technology, torts, evidence, innovation, negligence, products liability, medical malpractice, custom
Abstract: This Essay proposes a mechanism for expanding competition in state property law, while sketching out the limitations necessary to protect third parties.
The fact that property law is produced by the states creates a unique opportunity for experimentation with such property and property-related topics as same-sex marriages, community property, adverse possession and easements. The Essay begins by demonstrating the salutary effects of federalism on the evolution of property law. Specifically, it shows that competition among states has created a dynamic property system in which new property institutions replace obsolete ones.
The Essay then contemplates the possibility of increasing innovation and individual choice in property law by inducing state competition over property regimes. Drawing on the scholarly literature examining state competition for corporate law and competition over the provision of local public goods, the Essay constructs an "open" property system that creates an adequate incentive for the states to offer new property regimes and allows individuals to adopt them without relocating to the offering state.
This Essay also has important implications for the burgeoning literature on the numerus clausus principle, under which the list of legally permissible property regimes is closed. The Essay argues that in a federalist system, it is socially desirable to expand the list of property forms to include certain out-of-state forms.
property law, competition in property law, competition among states, federalism and property law, numerus clausus principle
Abstract: Traditionally, patent protection extended only to full-fledged inventions. In recent years, however, the legal landscape has changed. Patent law is gradually extending its reach to cover "embryonic inventions," and even naked ideas. This Essay has two goals. The first is to present an economic case against extending property rights to embryonic inventions and ideas. Specifically, this Essay argues that property rights in ideas will hinder technological progress. This Essay's second goal is to propose an alternative legal regime that would enhance innovation. To this end, this Essay contemplates the possibility of formalizing a very limited and narrow legal entitlement in ideas in order to establish a marketplace where ideas may be exchanged. After rejecting existing models of property and intellectual property protection as the foundation for a market for ideas, we propose an original market design that could enhance innovation without impoverishing the public domain.
Abstract: In this Essay we introduce a model of copyright law that calibrates authors' rights and liabilities to the level of originality in their works. We advocate this model as a substitute for the extant regime that unjustly and inefficiently grants equal protection to all works satisfying the "modicum of creativity" standard. Under our model, highly original works will receive enhanced protection and their authors will also be sheltered from suits by owners of preexisting works. Conversely, authors of less original works will receive diminished protection and incur greater exposure to copyright liability. We operationalize this proposal by designing separate rules for highly original works, for works exhibiting average originality, and for works that are minimally original or unoriginal. We illustrate our rules' application by showing how they could have altered court decisions in classic copyright cases in a socially beneficial way.
copyright, intellectual property law, novelty, efficiency, modicum of creativity, scope of protection, doctrine of inequivalents, added value doctrine, sameness rule, overbreadth
Abstract: In this Article we explore the evolution of property law and examine the applicability of the prevailing accounts according to which property institutions oscillate between the extreme points of open access and private property. We show that the evolution of property is a much more nuanced process, shaped by the interplay of the following three dimensions: number of owners, extent of dominion and asset configuration. Accordingly, property institutions can assume a myriad of positions along the aforementioned dimensions in response to the constant change in exclusion and management costs. We demonstrate our theory by discussing examples of three dimensional adjustments of real, personal and intellectual property.
property, evolution of property, Demsetz, dimensions of property, property rights
Abstract: The use of bribes to co-opt an enemy's forces can be a more effective way to wage war than the conventional use of force: Relative to bombs, bribes can save lives and resources, and preserve civic institutions. This essay evaluates the efficacy and normative desirability of selectively substituting bribes for bombs as a means of warfare. We show how inter-country disparities in wealth, differences in military strength, the organization of the bribing and recipient forces, uncertainty about the outcome of the conflict, and communications technology can contribute to the efficacy of bribes. We discuss methods for enforcing bargains struck between opposing forces, a key problem in structuring bribes. We also examine the legal status of bribe agreements, under both international and U.S. law. While the former apparently views bribery as legitimate means of warfare, the latter poses a potentially significant obstacle by refusing on public policy grounds to enforce secret contracts made with foreign agents.
contracts, law of war, bargaining, bribery
Abstract: With a tiny handful of exceptions, common law jurisprudence is predicated on a "winner-take-all" principle: the plaintiff either gets the entire entitlement at issue or collects nothing at all. Cases that split an entitlement between the two parties are exceedingly rare. While there may be sound reasons for this all-or-nothing rule, we argue in this Article that the law should prefer equal division of an entitlement in a limited but important set of property, tort and contracts cases. The common element in such cases is a windfall, a gain or loss that occurs despite the fact that no ex ante effort to promote, prevent, or allocate it would be cost-justified or reasonable. We show that an equal division of disputed windfalls in these cases promotes both efficiency and fairness, and also has the virtue of clarifying some tortured legal doctrines.
We also address and reject the standard objections to split-the-difference remedies. We demonstrate that using such remedies is unlikely to distort judicial incentives, and that it is likely to improve the integrity of the judicial system. Counterintuitively, we show that giving judges the option to order a compromise remedy in windfall disputes is likely to reduce judicial error, rather than to increase it, and that the valuation problems that attend the introduction of a split-the-difference rule are insignificant.
Property, Torts, Contracts, Jurisprudence, Common Law, Winner-Take-All, Split Entitlement, Windfall, Efficiency, Fairness, Judicial Incentives, Judicial Error, Valuation
Abstract: In this Essay, we challenge the conventional typology of constitutional takings by bringing to light a previously unrecognized type of taking-the derivative taking. We show that virtually every exercise of the power of takings generates derivative takings that have largely evaded takings scholars. Furthermore, we demonstrate that the failure of existing takings doctrine to account for derivative takings leads to inefficient and inequitable results. In particular, this failure disproportionately harms the poor. To remedy this problem, we craft an economic model of self-assessment to optimize constitutional protection at low administrative cost. Importantly, our self-assessment mechanism incentivizes property owners to report truthfully the losses they suffer as a result of government takings. We accomplish this by basing our mechanism on the principle of probabilistic enforcement accompanied by weighted penalties on exaggerations. By lowering the administrative cost of compensation, our self-assessment mechanism enables the compensation of currently uncompensated property owners, and enhances economic efficiency as it forces the government to fully internalize the cost of its actions. We further show that the utilization of our self-assessment mechanism can illuminate and resolve many of the shortcomings of existing takings doctrine. Our self-assessment mechanism may be used to compensate victims of physical takings and perform this function at a much lower cost than the judicial mechanism currently in place. Its utilization in the context of regulatory takings offers the opportunity to reduce dramatically the cost of administering claims and to clarify such currently ambiguous rules as when a regulation "goes too far" and becomes an exercise of the power of eminent domain. Finally, the information garnered from the self-assessment report may enable us to distinguish between uses of the taxation power that legitimately go uncompensated and takings that demand compensation. We submit that the aggregation of these effects would result in a better and fairer use of the takings power, and begin the process of injecting coherence into a desperately confused area of the law.
Abstract: This Essay addresses an anomaly in trespass law. Trespass law is generally understood as the paradigmatic example of property-rule protection: an owner can obtain an injunction against the trespasser and have him removed from her land. The property-rule protection enjoyed by the owner protects her right to exclude others and to set the price for the use of her property. However, the property-rule protection only exists ex ante: it avails only against imminent or ongoing trespasses. Ex post, after a trespass ends, the owner can only recover compensation measured by the market value of the unauthorized use, i.e., the going rent. This liability-rule compensation dilutes the ex ante property-rule protection of ownership. Effectively, it grants trespassers a call option on others' property, creating a mismatch between rights and remedies. To remedy this mismatch, we introduce the concept of propertized compensation - a damage measure that sets compensation equal to the owner's pre-trespass asking price. We contend that propertized compensation should become the primary remedial option in trespass cases. The use of this measure will reinstate the owner's position as a price maker, entitling her to recover the amount that she would have agreed to accept ex ante in a voluntary exchange. We further argue that owners who cannot produce evidence regarding their pre-trespass asking price (as well as owners who prefer not to seek propertized compensation) should be entitled to seek disgorgement of the trespasser's profits. Finally, we claim, contra the extant regime, that market-value compensation should only be used in the exceptional cases of trespass by necessity, media trespass, and good faith encroachments. In all other cases, it should only be awarded if the owners specifically ask for it.
Property law, property-rule protection, ongoing trespasses, imminent trespassing, disgorgement of profits, market-value compensation, trespass by necessity, media trespass, good faith encroachment, rights and remedies, evidence, evidence law, cheap talk, credible signaling, propertized compensation
Abstract: In the thirty years since Calabresi and Melamed's seminal Property Rules, Liability Rules, and Inalienability: One View of the Cathedral, scholars have divided protection for legal entitlements into two major types: property rules and liability rules. In this Article, we uncover an overlooked, but crucial third type of legal protection: pliability rules. Pliability rules combine the features of property rules and liability rules, either sequentially or simultaneously. Pliability rules are thus ideal for situations where a legal entitlement must cope with changing circumstances, conflicting policy goals or the inherent limitations of property and liability rules. The Article serves three goals. Conceptually, we show that pliability rules are ontologically distinct from their familiar cousins, and create different effects on incentives and distribution. Descriptively, we demonstrate that while the academy has overlooked them, pliability rules already affect such diverse legal fields as property, antitrust, corporate law and intellectual property. And, normatively, we uncover ways in which pliability rules can revolutionize the patent system and eminent domain jurisprudence, solve anticommons problems and provide a valuable prism to understand the law of bankruptcy.
property rules, liability rules, entitlements, pliability rules
Abstract: This Essay identifies an anti-innovation bias in the law of torts. Tort law's reliance on custom in ascribing liability for negligence, medical malpractice and defective products taxes innovators and subsidizes replicators of conventional technologies. The Essay analyzes the causes and consequences of this bias and proposes two alternative ways to remedy it.
torts, medical malpractice, product liability, innovation, evidence, economic analysis
Abstract: Hate crime legislation has sparked substantial political controversy and scholarly discussion. Existing justifications for hate crime legislation proceed on the premise that the rationale supporting such legislation must be found either in the greater gravity of the wrongdoing involved or in the perpetrator's greater degree of culpability. This premise stems from a fundamental theory that dominates criminal law scholarship: the wrongfulness-culpability hypothesis. The wrongfulness-culpability hypothesis posits that the only two grounds that may justify disparate treatment of offenses are the greater wrongfulness of the act or the greater culpability of the perpetrator. Yet, all attempts to demonstrate that hate crimes are more wrongful or morally reprehensible than other crimes have failed to carry the day. This Article challenges the dominance of the wrongfulness-culpability hypothesis and proffers an alternative paradigm that supports bias crime legislation: the fair protection paradigm. The fair protection paradigm conceptualizes protection against crime as a good produced by criminal law and thus requires that it be distributed in an equal manner. Specifically, it imparts a duty on the state to equalize individuals' vulnerability to crime. An individual's vulnerability to crime can be defined as her expected harm from crime--that is, the probability of harm multiplied by its magnitude. A state may address the problem of vulnerable victims in one of two ways. First, it may impose harsher sanctions on those who commit crimes against vulnerable victims. Second, it may devote more resources to the identification and prosecution of individuals who attack such victims. When the latter tactic is unfeasible for some reason, equalizing protection against crime through the imposition of harsher sanctions may be the only way by which the state can provide vulnerable victims with greater protection and thus equalize their vulnerability to that of other potential victims. The fair distribution of protection does not require absolute equality in expected costs of crime to the victim. Vulnerability to crime is a function of myriad factors such as wealth, age, and attitude towards risk, life experience, and physical and intellectual prowess. Moreover, disparities in vulnerability to crime often depend on the precautions taken by the victim herself. The state cannot be reasonably expected to annul all disparities in the vulnerability of different potential victims of crime. This Article argues, however, that at a minimum the state ought to annul disparities that stem from certain personal characteristics of victims, such as race, gender, religion, and sexual orientation. This Article also shows that the explanatory power of the "fair protection paradigm" ranges far beyond the context of hate crimes. The fair protection paradigm can explain, for instance, why crimes directed against particularly vulnerable victims, such as the elderly and the disabled, are often punished more severely than crimes directed against less vulnerable ones. Properly understood, therefore, hate crime legislation is part of a larger scheme of providing fair protection against crime. Recognizing the right of victims to equal protection from crime makes it clear that hate crime legislation is consonant with the goals of criminal law. Hate crime legislation is merely one essential step towards a more egalitarian provision of protection against crime--a step which is congruous with the broader goals of the criminal law system.
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