Patent Liability Rules as Search Rules
I thank Richard Epstein, Mark Lemley, Saul Levmore, Doug Lichtman, and participants at the Licensing of Intellectual Property Symposium at The University of Chicago Law School for helpful comments. I also thank Joe Bingham for excellent research assistance.
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Patent law’s infringement doctrines, commonly understood to be simply rules of liability, are in fact search rules as well. Patent liability rules determine not only who will be responsible for what conduct, but also when patent holders and potential infringers will benefit from locating (or remaining ignorant of) one another. They thus affect the conditions under which parties will have incentives to engage in search. The dynamics of patent search are actually quite complicated. Under normal circumstances, patent law’s liability rules generate approximately optimal investments in search as both patent holders and possible infringers have incentives to locate one another. But when a direct infringer is insolvent or unreachable, the fact that contributory infringers can be held liable only when they have knowledge of the patent shifts search responsibilities toward patent holders. Search incentives are also affected by patent law’s rules regarding past conduct and by the possibility of holdup problems based on alleged infringers’ product-specific investments. This Article demonstrates that patent law’s liability rules may be generating inefficient levels of search and corresponding social welfare losses and proposes a simple doctrinal corrective.
Search costs matter and are reflected in many areas of law. For example, most disclosure requirements economize on search costs. A homeowner who must disclose the presence of termites saves a potential buyer, and perhaps many such buyers, from spending money to search, or inspect, the property. Similarly, requirements to reveal expected miles per gallon, or risks posed by a drug, economize on search costs. But these examples point to simple strategies and costs that can be minimized or entirely avoided with some legal intervention. Law can do better and take account of more subtle things once sophisticated search strategies are understood. This Essay introduces such search strategies and their implications for law.
We thank Bruce Ackerman, Lucian Bebchuk, Robert Ellickson, Daniel Epps, Edward Fox, Jens Frankenreiter, Clayton Gillette, Brian Highsmith, Noah Kazis, Reinier Kraakman, Zachary Liscow, Jon Michaels, Mariana Pargendler, and David Schleicher, as well as those who provided feedback from presentations at Yale Law School and the annual meeting of the American Law and Economics Association. We also thank Josh Kaufman, Daniella Apodaca, Jonah Klausner, and the other editors of the University of Chicago Law Review for their excellent feedback on both substance and style.
We thank Bruce Ackerman, Lucian Bebchuk, Robert Ellickson, Daniel Epps, Edward Fox, Jens Frankenreiter, Clayton Gillette, Brian Highsmith, Noah Kazis, Reinier Kraakman, Zachary Liscow, Jon Michaels, Mariana Pargendler, and David Schleicher, as well as those who provided feedback from presentations at Yale Law School and the annual meeting of the American Law and Economics Association. We also thank Josh Kaufman, Daniella Apodaca, Jonah Klausner, and the other editors of the University of Chicago Law Review for their excellent feedback on both substance and style.
When one thinks of government, what comes to mind are familiar general-purpose entities like states, counties, cities, and townships. But more than half of the 90,000 governments in the United States are strikingly different: They are “special-purpose” governments that do one thing, such as supply water, fight fire, or pick up the trash. These entities remain understudied, and they present at least two puzzles. First, special-purpose governments are difficult to distinguish from entities that are typically regarded as business organizations—such as consumer cooperatives—and thus underscore the nebulous border between “public” and “private” enterprise. Where does that border lie? Second, special-purpose governments typically provide only one service, in sharp contrast to general-purpose governments. There is little in between the two poles—such as two-, three-, or four-purpose governments. Why? This Article answers those questions—and, in so doing, offers a new framework for thinking about special-purpose government.
We thank Lucian Bebchuk, Alon Brav, Ryan Bubb, Ed Cheng, Quinn Curtis, Elisabeth de Fontenay, Jared Ellias, Jill Fisch, Joe Grundfest, Cam Harvey, Scott Hirst, Colleen Honigsberg, Marcel Kahan, Louis Kaplow, Jonathan Klick, Brian Leiter, Saul Levmore, Dorothy Lund, John Morley, Mariana Pargendler, Elizabeth Pollman, Roberta Romano, Paolo Saguato, Holger Spamann, George Vojta, and Michael Weber for valuable suggestions and discussions. This Article has benefited from comments by workshop participants at Columbia Law School, George Mason University Antonin Scalia Law School, Georgetown University Law Center, Harvard Law School, Stanford Law School, UC Berkeley School of Law, the University of Chicago Law School, the University of Oxford Faculty of Law, the University of Pennsylvania Carey Law School, the University of Toronto Faculty of Law, the University of Virginia School of Law, and the Washington University School of Law, as well as at the American Law and Economics Association Annual Meeting, the Corporate & Securities Litigation Workshop, the Labex ReFi-NYU-SAFE/LawFin Law & Banking/Finance Conference, and the Utah Winter Deals Conference. Robertson gratefully acknowledges the support of the Douglas Clark and Ruth Ann McNeese Faculty Research Fund. Katy Beeson and Levi Haas provided exceptional research assistance. All errors are our own.
We thank Lucian Bebchuk, Alon Brav, Ryan Bubb, Ed Cheng, Quinn Curtis, Elisabeth de Fontenay, Jared Ellias, Jill Fisch, Joe Grundfest, Cam Harvey, Scott Hirst, Colleen Honigsberg, Marcel Kahan, Louis Kaplow, Jonathan Klick, Brian Leiter, Saul Levmore, Dorothy Lund, John Morley, Mariana Pargendler, Elizabeth Pollman, Roberta Romano, Paolo Saguato, Holger Spamann, George Vojta, and Michael Weber for valuable suggestions and discussions. This Article has benefited from comments by workshop participants at Columbia Law School, George Mason University Antonin Scalia Law School, Georgetown University Law Center, Harvard Law School, Stanford Law School, UC Berkeley School of Law, the University of Chicago Law School, the University of Oxford Faculty of Law, the University of Pennsylvania Carey Law School, the University of Toronto Faculty of Law, the University of Virginia School of Law, and the Washington University School of Law, as well as at the American Law and Economics Association Annual Meeting, the Corporate & Securities Litigation Workshop, the Labex ReFi-NYU-SAFE/LawFin Law & Banking/Finance Conference, and the Utah Winter Deals Conference. Robertson gratefully acknowledges the support of the Douglas Clark and Ruth Ann McNeese Faculty Research Fund. Katy Beeson and Levi Haas provided exceptional research assistance. All errors are our own.
We thank Lucian Bebchuk, Alon Brav, Ryan Bubb, Ed Cheng, Quinn Curtis, Elisabeth de Fontenay, Jared Ellias, Jill Fisch, Joe Grundfest, Cam Harvey, Scott Hirst, Colleen Honigsberg, Marcel Kahan, Louis Kaplow, Jonathan Klick, Brian Leiter, Saul Levmore, Dorothy Lund, John Morley, Mariana Pargendler, Elizabeth Pollman, Roberta Romano, Paolo Saguato, Holger Spamann, George Vojta, and Michael Weber for valuable suggestions and discussions. This Article has benefited from comments by workshop participants at Columbia Law School, George Mason University Antonin Scalia Law School, Georgetown University Law Center, Harvard Law School, Stanford Law School, UC Berkeley School of Law, the University of Chicago Law School, the University of Oxford Faculty of Law, the University of Pennsylvania Carey Law School, the University of Toronto Faculty of Law, the University of Virginia School of Law, and the Washington University School of Law, as well as at the American Law and Economics Association Annual Meeting, the Corporate & Securities Litigation Workshop, the Labex ReFi-NYU-SAFE/LawFin Law & Banking/Finance Conference, and the Utah Winter Deals Conference. Robertson gratefully acknowledges the support of the Douglas Clark and Ruth Ann McNeese Faculty Research Fund. Katy Beeson and Levi Haas provided exceptional research assistance. All errors are our own.
For years, academic experts have championed the widespread adoption of the “Fama-French” factors in legal settings. Factor models are commonly used to perform valuations, performance evaluation and event studies across a wide variety of contexts, many of which rely on data provided by Professor Kenneth French. Yet these data are beset by a problem that the experts themselves did not understand: In a companion article, we document widespread retroactive changes to French’s factor data. These changes are the result of discretionary changes to the construction of the factors and materially affect a broad range of estimates. In this Article, we show how these retroactive changes can have enormous impacts in precisely the settings in which experts have pressed for their use. We provide examples of valuations, performance analysis, and event studies in which the retroactive changes have a large—and even dispositive—effect on an expert’s conclusions.