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Property Rules, Liability Rules, and Patents: One Experimental View of the Cathedral

Andrew W. Torrance

University of Kansas - School of Law

Bill Tomlinson

University of California, Irvine

January 24, 2012

Yale Journal of Law & Technology, Vo. 14, p. 138, 2011

In their seminal 1972 article, "Property Rules, Liability Rules, and Inalienability: One View of the Cathedral," Guido Calabresi and A. Douglas Melamed proposed an analytic framework for comparing entitlements protected by property rules and liability rules. Their article has become one of the cornerstones of modern legal scholarship, and the influence of the theory of legal rules they established has extended far beyond tort and property into almost every area of the law, including intellectual property. Despite the prodigious influence this theory of legal rules has had, its implications have never been explored experimentally. To remedy this knowledge gap, we conducted a series of controlled experiments on liability and property rules, using the patent system as an experimental model. Expressed in the nomenclature of Calabresi and Melamed, the United States’ patent law has recently witnessed a shift away from property rules and towards liability rules. This Article presents an experimental study that attempts to test the hypothesis that amounts of innovation, productivity, and social utility vary across patent systems that tend to emphasize either property rules or liability rules. The results of our experiments suggest that the choice between property and liability rules does, indeed, matter, but in a surprising way. Despite the common assumption that property rules tend to outperform liability rules, we found the opposite: in a computational model of the patent system, liability rules outperformed property rules in generating innovation, productivity, and social utility.

Number of Pages in PDF File: 24

Keywords: patent, patent law, patent infringement, patent enforcement, liability rule, property rule, injunction, damages, Calabresi, Melamed, experiment, simulation game, innovation, invention, productivity, wealth, social utility

JEL Classification: C90, C91, C92, K00, K11, K13, K40, K41, K42, L12, O30, O31, O32, O33, O34, O38, O39

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Date posted: January 29, 2012  

Suggested Citation

Torrance, Andrew W. and Tomlinson, Bill, Property Rules, Liability Rules, and Patents: One Experimental View of the Cathedral (January 24, 2012). Yale Journal of Law & Technology, Vo. 14, p. 138, 2011. Available at SSRN: http://ssrn.com/abstract=1991453

Contact Information

Andrew W. Torrance (Contact Author)
University of Kansas - School of Law ( email )
Green Hall
1535 W. 15th Street
Lawrence, KS 66045-7577
United States
Bill Tomlinson
University of California, Irvine ( email )
Bren Hall
Irvine, CA 92697-3440
United States
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