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Intellectual Property, Private Law, and the Supreme Court — Conference Announcement

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Post by Patrick Goold The Project on the Foundations of Private Law at Harvard Law School and the Intellectual Property Law Program at The George Washington University Law School invite you to attend Intellectual Property, Private Law, and the Supreme Court, a day-long conference in Washington, DC, on March 10. In the last decade, the … Read more

Patent Exhaustion and Private Law Goes to the Supreme Court — Patrick Goold

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Post by Patrick Goold

Sir Edward Coke’s Institutes of the Lawes of England, first published in 1628, rarely influences the direction of modern U.S. patent law. But that might be about to change. This December, the Supreme Court of the United States granted certiorari in the case of Impression Products, Inc. v. Lexmark International, Inc., Supreme Court Docket No. 15-1189, concerning the scope of the patent exhaustion doctrine. The case will interest readers of this blog because it highlights the conceptual and doctrinal relationship between IP exhaustion and common law rules regarding restraints on alienation.

The case involves the ongoing battle over refurbished printer toner cartridges. Lexmark International makes printer toner cartridges, over which it owns a number of patents. These cartridges fall into two types: “Regular Cartridges” are sold at full price; while “Return Program Cartridges” are sold at a discount but come with a “single-use/no-resale” restriction, meaning the buyer may neither reuse nor resell the cartridge after the toner has run out. Lexmark sells these cartridges both domestically in the U.S. and abroad. In 2014, Lexmark sued Impression Products for patent infringement. Impression Products had previously: (1) bought domestically-sold Return Program Cartridges, modified by third parties to allow refilling, and resold them in the U.S.; and (2) imported and resold both Regular and Return Program Cartridges from foreign markets. Lexmark maintained both of these actions infringed their U.S. patent rights under § 271 of the Patent Act. Impression argued that both of these acts were non-infringing due to the Patent Exhaustion doctrine, which holds that “the initial authorized sale of a patented item terminates all patent rights to that item.” Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617, 625 (2008). John Golden has discussed the case in a prior New Private Law Blog post.

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Harvard Law School’s Private Law Workshop: Oren Bar-Gill & Ariel Porat, Disclosure Rules in Contract Law

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Post by Patrick Goold

Caveat emptor, or buyer beware, was the traditional principle of Anglo-American contract law. Today, however, many common law jurisdictions require the seller to disclose material information to the buyer prior to sale. Nevertheless, the duty to disclose is still subject to debate. Should the law obligate the seller to disclose pertinent information (a mandatory disclosure rule)? Or should disclosure be at the discretion of the seller (a voluntary disclosure rule)? In Disclosure Rules in Contract Law, Oren Bar-Gill and Ariel Porat study how mandatory and voluntary disclosure rules affect sellers’ incentives to invest in pre-sale investigation of goods. Speaking at the final installment of this year’s Private Law Workshop, Oren Bar-Gill explained their conclusion: that mandatory disclosure rules typically, but not always, provide sellers with efficient incentives to acquire socially valuable information regarding the asset.  

Imagine the following example. Having lived in a house for 10 years, the owner suspects there is water beneath the house that might damage its foundations. Before selling the property, the owner could hire a surveyor to investigate whether underground water exists. Whether hiring a surveyor is efficient depends on the value of the information investigation reveals relative to the cost of acquiring it, i.e. hiring the surveyor.

In 1994, Steven Shavell studied how mandatory (MD) and voluntary disclosure (VD) rules affected the incentives of sellers to undertake such investigations. Shavell found that MD rules create efficient incentives, while VD rules do not. If the owner knows that any information the investigation reveals must be disclosed, then he will only invest in the investigation if the expected increase in value to the asset outweighs the cost of the investigation. Conversely, voluntary disclosure rules cause owners to invest too heavily in information-acquisition, on the grounds that any favorable information can be used to demand a higher price, while unfavorable information is simply ignored.

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On Plain Meaning and Pacific Gas — Greg Klass

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Post by Greg Klass

Judge Traynor’s opinion in Pacific Gas & Electric v. Thomas Drayage & Rigging is a bête noire of textualist judges and contracts scholars. Judge Kozinski’s assessment is typical:

Pacific Gas casts a long shadow of uncertainty over all transactions negotiated and executed under the law of California. As this case illustrates, even when the transaction is very sizeable, even if it involves only sophisticated parties, even if it was negotiated with the aid of counsel, even if it results in contract language that is devoid of ambiguity, costly and protracted litigation cannot be avoided if one party has a strong enough motive for challenging the contract.

Trident Center v. Connecticut Gen. Life Ins. Co., 847 F.2d 564, 569 (9th Cir. 1988).

The objection is that permitting extrinsic evidence significantly increases the probability that a court will find ambiguity. The facts in Pacific Gas appear to illustrate the worry. Whereas the scope of the indemnification clause at issue was clear, covering “all loss, damage, expense and liability resulting from * * * injury to property, arising out of or in any way connected with the performance of this contract,” the defendant wanted to introduce extrinsic evidence that in fact the parties meant it to cover only third-party losses. Permitting that evidence in created ambiguity where none existed before.

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Harvard Law School’s Private Law Workshop: Mischkowski, Stone & Stremitzer, Promises, Expectations, and Social Cooperation

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Post by Samuel Beswick, Frank Knox Memorial Fellow, SJD candidate, Harvard Law School

At last Wednesday’s Private Law Workshop, Rebecca Stone presented new experimental evidence on whether, and under what conditions, people regard promises as generating obligations to keep them. Based on a study of some 780 subjects, Mischkowski, Stone and Stremitzer find that people regard the issuance of a promise in and of itself, and the fact of another’s reliance on a promise, as each carrying binding force. They further find an additive effect when the two conditions co-exist—i.e., when a promise is relied upon.

The authors set up a simple vignette study: imagine you are a prospective buyer and have told a seller that you will purchase a product from them for $100 when you get back into town. Depending on the version of the vignette (six versions were randomly assigned to the pool of subjects), you either promised to make the purchase or you stated an intention to buy the product but disavowed any promise to do so. You (the buyer) are told that the seller—in the spirit of Monty Python’s shopkeeper who is alternately rude and polite—either believed your promise, did not believe your promise, or was not sure (again, depending on the version of the vignette, randomly assigned). Finally, you are told that, prior to your return you happen to learn that another seller is prepared to sell you the same product for $85. Subjects are then asked whether they will buy from the original seller or instead buy from the other seller at the lower price.

Mischkowski, Stone and Stremitzer find evidence of three motivations for people’s decisions to keep their promises. First, regardless of whether they made or disavowed a promise to the original seller, subjects who were told that the seller had credited their assertions that they were planning to buy from the seller were more inclined to buy from the original seller than subjects who were told that the seller had not credited or had doubted their assertions (an expectations per se effect). Second, subjects who made a promise, as opposed to those who disavowed any promise, were more inclined to buy from the original seller regardless of what they were later told about the seller’s expectations (a promising per se effect). Third, subjects were most inclined to keep their promises when they had promised to purchase from the original seller and when they were told that the seller was expecting them to purchase the product (an interaction effect).

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North American Workshop on Private Law Theory IV

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Post by Patrick Goold

Earlier this month, Fordham University School of Law hosted the fourth annual North American Workshop on Private Law Theory (NAWPLT). This edition of NAWPLT—a yearly conference that gathers U.S and Canadian private law scholars to discuss works-in-progress selected by a steering committee—was organized by Fordham Professors Aditi Bagchi and Ben Zipursky.

In twentieth century legal theory, few issues have received more attention than the question: “What is Property?” Eric Claeys, in Property as an Institutional Artifact, defends a revisionist view. To Claeys, property is not merely a form (a bundle of jural relations), but has an essential substantive content: exclusive use. A property right, on this view, confers on one individual the exclusive authority to benefit from or manage a resource. In a related vein, James Stern’s paper, titled Intellectual Property and the Myth of Nonrivalry, argued against the prevailing view that intangible goods are “nonrivalrous.” Insofar as people have incompatible desires about how intangible goods are to be used, they resemble tangible goods, and hence there can be a need for a legal architecture that delegates to one individual the exclusive right to decide how such goods are used.  

In Legal Positivism as an Idea About What Morality Might Be, Martin Stone considered through the lens of tort law another ‘eternal’ question: the relation of law and morality. Taking issue with the view that the distinctiveness of legal positivism resides in its account of the nature of law, Stone maintains that it instead resides in a particular instrumental understanding of the relation of morality to law. In Retaliatory RICO and the Puzzle of Fraudulent Claiming, meanwhile, Nora Engstrom discussed a new technique repeat-player defendants are using to fight fraudulent claims: the Racketeer Influenced and Corrupt Organizations Act (RICO). When it was signed into law in 1970, Congress probably did not envision that RICO’s provisions on bribery, fraud, and obstruction of justice would allow corporate defendants to retaliate against plaintiffs bringing baseless claims to court. Questions remain regarding whether such retaliatory RICO actions can be exercised in a sensible and even-handed manner.

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Harvard Law School’s Private Law Workshop: Patricia McMahon, The Interplay Between Nineteenth Century Codes and the Fusion of Law and Equity

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Post by Patrick Goold

Codification of the common law and the fusion of law and equity were two of the most prominent law reform efforts of the nineteenth century. Legal historians have, however, rarely considered the connection between these two movements. At a recent Private Law Workshop, Patricia McMahon tried to map out the interplay between the fusion and codification movements of nineteenth century New York and England. McMahon finds that while often fusion and codification mutually supported each other, there was an inherent tension between the two goals, and this tension has continued relevance for today.

On one level, fusion was a boon to the codification movements. In New York, procedural fusion was accomplished in 1848 with the adoption of the New York Code of Civil Procedure, also known as the Field Code after its principle architect David Dudley Field. Field believed that the codification of procedure was the best way to transition from separate systems of law and equity to one single court. The success of the Field Code for legal procedure proceeded to serve as an example that codes and codification was a realistic possibility. In both New York and England, those wishing to codify the substantive common law pointed to Field’s Code as proof that codes worked!

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Restitution and Unjust Enrichment Discussion Group — Samuel Beswick

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Post by Samuel Beswick, Frank Knox Memorial Fellow, SJD candidate, Harvard Law School

Private law theory is enjoying a revival in Cambridge, M.A. Alongside the HLS Private Law Workshop, the Project on the Foundations of Private Law and the Law and Philosophy Society, last Thursday saw the launch of the Restitution and Unjust Enrichment Discussion Group at Harvard. The RUED Group brings together scholars and students in the Boston area who share an interest in the law of unjust enrichment to meet and discuss topical developments in the field.s

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Harvard Law School’s Private Law Workshop: John C. Harrison, Immunity Rules

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Post by Samuel Beswick, Frank Knox Memorial Fellow, SJD candidate, Harvard Law School

In the third of our trilogy of sessions on Hohfeld, Professor Harrison this week presented to the HLS Private Law Workshop a view of Calabresi and Melamed’s famous Cathedral article through a Hohfeldian lens. Calabresi and Melamed organized legal entitlements into three types: those protected by property rules, those protected by liability rules, and inalienable entitlements. An entitlement is protected by a liability rule when, if it is interfered with, the law requires only that the defendant pay an objectively determined value for it (generally in the form of compensatory damages).

Liability rules, Harrison contends, are “a false category.” Calabresi and Melamed had taken accident law from tort and eminent domain from the law of property, and grouped the two as examples of “instances in which society uses liability rules.” But their typology obscured the analytically distinct nature of these categories in two ways: by conflating rules about right/duty and rules about power/liability; and by conflating substantive law and remedies.

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Harvard Law School’s Private Law Workshop: Christopher Newman, Hohfeld and the Theory of In Rem Rights: An Attempted Reconciliation

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Post by Patrick Goold

Few questions have received more attention in law than the question “What is Property?” Is an in rem right a right over a thing, as the traditional (and perhaps resurgent) view holds? Or is the term “right in rem” an outmoded reference to a bundle of jural relations existing between individuals (as Hohfeld argued almost a century ago)? Is there a way to reconcile these two competing theories—for property to be both a right over a thing and bundle of rights? At this week’s HLS Private Law Workshop, Christopher Newman presented a work-in-progress in which he attempted a reconciliation of these apparently conflicting understandings of in rem rights.

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“Channeling” District Court Discretion in IP and Beyond — John Golden

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Post by John Golden

In both a patent case and a copyright case from soon-to-end October Term 2015, the U.S. Supreme Court continued a long struggle to define the proper bounds of trial court discretion in various contexts. See generally Henry J. Friendly, Indiscretion About Discretion, 31 Emory L.J. 747, 748–50 (1982). Such questions of trial court discretion commonly relate to questions about the proper nature of equity or equity-like reasoning in district court decision-making, questions that are presumably of interest to a number of readers of this blog.

Questions about trial court discretion have recently had particular prominence in patent law. In this area, an ever-growing string of Supreme Court decisions has, over the course of a decade, rejected what the Court has perceived as excessively rigid rules developed by the U.S. Court of Appeals for the Federal Circuit. See David O. Taylor, Formalism and Antiformalism in Patent Law Adjudication: Rules and Standards, 46 Conn. L. Rev. 415, 464–65 (2013). The newest addition to the string came in June in Halo Electronics, Inc. v. Pulse Electronics, Inc., 136 S. Ct. 1923 (2016). In an opinion by Chief Justice Roberts, the Court rejected as “unduly rigid” a Federal Circuit rule permitting the enhancement of patent damages for willful infringement only when the infringer’s conduct was objectively reckless with respect to violation of relevant patent rights. Id. at 1932 (internal quotation marks omitted).

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Harvard Law School’s Private Law Workshop: Hanoch Dagan and Michael Heller, The Choice Theory of Contracts

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Post by Samuel Beswick, Frank Knox Memorial Fellow, SJD candidate, Harvard Law School

Let’s put freedom back into “freedom of contract.” That’s the ambition Professors Hanoch Dagan and Michael Heller set out in their forthcoming book, The Choice Theory of Contracts, excerpts of which the authors presented at this week’s HLS Private Law Workshop.

Dagan and Heller contend that contract law’s ultimate value is, and ought to be, enhancing individual autonomy. They say that only a “choice theory” of contracts facilitates such autonomy: only when contract law offers a sufficient array of contract “types” will individuals be free meaningfully to author their own destinies. The explication of this liberal theory entails engaging with, and unseating dogma on, two fundamental questions: what is contract? And what is freedom?

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Harvard Law School’s Private Law Workshop: Nathan Oman, Reconsidering Contractual Consent

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Post by Patrick Goold

How important is consent in contract law? Less important than many suppose, says Professor Nathan Oman. At the first HLS Private Law Workshop of the new academic year, Oman presented his current work in progress, Reconsidering Contractual Consent: Why We Shouldn’t Worry Too Much About Boilerplate and Other Puzzles. In this thought-provoking article, Oman argues that robustly voluntary consent to obligations is far less important to the normative defense of contract law than is often assumed.

Oman’s analysis begins with a puzzle. Normative theories of contract tend to suggest that party consent is necessary to justify enforcing contractual obligations. For autonomy theorists, holding parties accountable for commitments to which they have not meaningfully consented interferes with their ability to self-govern. For economists, consent is an important indication that the transaction makes both parties better off. But here’s the paradox: contract law regularly does not require meaningful party consent before enforcing obligations. Many situations exist wherein courts uphold agreements where the parties are almost wholly ignorant of the terms – boilerplate terms providing a familiar example.

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“Zombie Debt”: Obligation without Liability? — Aditi Bagchi

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Post by Aditi Bagchi

John Oliver recently purchased and forgave about $15 million in medical debt.  (See https://www.youtube.com/watch?v=hxUAntt1z2c)  His objective was to draw attention to the dubious practices of debt collectors, as well as their “right” to buy information about people who once owed money and to try to collect money from them, even if the debt is no longer legally binding because the statute of limitations has expired.  (What I will refer to as expired debt is also known as “zombie debt.”)  If a debtor makes or promises an additional payment or admits obligation, the statute of limitations may actually be extended and the dead debt may be revived.

There is a fair amount of legislation to protect consumers from debt collectors.  Debt collectors may not discuss debt with debtors’ friends or family and they may not threaten to sue on debt that has expired.  Individuals have the right to demand that debt collectors not call at work or that they cease direct communications with the debtor all together.  A lot of the worst practices by debt collectors are already illegal.

But not all of it.  Why not flat out ban the sale of expired debt?  Why not impose hefty fines on any attempted sale of such debt, including transmission of debtors’ information?  And why not heftier fines on any attempt to collect expired debt?

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Why Private Law? — Patrick Goold

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Post by Patrick Goold

I have a question for the readers of this blog: Why make a distinction between public law and private law? Note, my question is not what is the distinction, but why is it a useful and helpful division to make? Of course, both questions are important and interrelated, but for now, I would like to focus on the latter.

This may be the central question in the New Private Law. Prior private law scholarship has typically fallen into two broad schools. On one hand, there are the Private Law Skeptics, who argue that all law has “public” ends, and ergo all law is public. On the other hand, we find Private Law Disciples, who point to the millennia-old private-public law distinction and assume it will simply continue. New Private Lawyers are different from both traditional camps. We do not take for granted the private-public distinction. Rather, as inclusive pragmatists, we demand to know whether this is a distinction worth retaining. What good does it do us? But, contrary to Private Law Skeptics, most of us, at least intuitively, believe that something is or can be accomplished by retaining the distinction. So the question is: what is that?

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