Property
Limiting Locke: A Natural Law Justification for the Fair Use Doctrine
112 Yale L.J. 1179 (2003) Focusing a discussion of intellectual property on a 300-year-old text may seem unusual, but John Locke's Two Treatises of Government has an uncommon place in American intellectual property theory. Historically, Lockean natural rights informed the Framers' understanding of intellectual property law. Courts also have a long history of using natural law justifications in intellectual property cases. The Lockean perspective has been particularly appealing to theorists because of its ability to justify widely varying property systems, ranging from expansive communitarianism to subsistence-worker-based capitalism. Although modern intellectual property doctrine has attempted to disavow its association with natural law justifications, some debate the ability of courts to adjudicate intellectual property claims without consulting natural law principles. Revisiting Locke for a theory of intellectual property has become vital because of two important recent shifts in doctrine and scholarship. First, statutory and doctrinal innovations have continued to expand private intellectual property rights. Second, academics have increasingly advocated the importance of the public domain as a way of limiting the expansion of private property rights. One recent example of the conflict between private intellectual property rights and the public domain is Eldred v. Ashcroft, upholding the Sonny Bono Copyright Term Extension Act, which extended the duration of a copyright to the life of the author plus seventy years. While the government's brief advocating for the copyright extension emphasized the need for fairness to authors, the petitioners' brief highlighted that "[p]etitioners are various individuals and businesses that rely upon speech in the public domain for their creative work and livelihood." These arguments were mirrored by amici, including the Recording Industry Association of America (RIAA) on the government's side, which emphasized the importance of "fair compensation of authors," and a group of fifty-three law professors, who stated that "[a]mici are in particular concerned about the recent, rapid expansion of copyright scope and duration, at the expense of the public domain." Scholars have seen Lockean theory as an essential tool in reconciling these arguments because the main thrust of Locke's theory is the reconciliation of strong private property rights with a common of materials available to all. Locke argues that laborers have a private property right in the products of their labor because individuals mix their labor with materials from the common that are free for all to use. The private property right in an individual's labor is mixed into the product of labor, and thus the private property right also attaches to the product of labor. He supports this argument by adding natural law principles that must be followed to maintain exclusive property rights. The natural law principle that has been most commonly considered by scholars is the sufficiency proviso, which requires that the laborer not take too many materials out of the common. Two substantial criticisms are often directed at Lockean theory. First, scholars argue that even though Locke claims to reconcile a robust common with strong private property rights, his property rights swallow the common. Thus, the object of Lockean theorists, as mirrored in the title of this Note, is often concerned with limiting the scope of the Lockean property right. Second, scholars argue that the sufficiency proviso cannot be fulfilled in a morally compelling way because the common of tangible goods is inherently scarce. Previous scholarship concerning Lockean theories of property rights in intangible goods has focused on the ability of the nonrivalrous characteristic of intangible goods to eliminate the scarcity problem. This scholarship began with the publication of two influential articles, one by Justin Hughes in 1988 and another by Wendy Gordon in 1993, and has been refined in the last decade. A fundamental difference between tangible goods and intangible goods, however, is that intangible goods are nonrivalrous, which means that they can be used by an infinite number of people in an infinite number of ways without harming the use value of any other person, including the initial producer. Previous scholarship has persuasively argued that because intangible goods are nonrivalrous, the common of intangible goods contains materials that are not subject to a scarcity problem and thus that Lockean theory does not fail when it is applied to intangible goods. Scholars have tended to overemphasize the importance of this claim, however, by conflating the Lockean common with a public domain. The Lockean common contains undeveloped materials, whereas a public domain is composed of developed goods. Although the Lockean common is quite useful for independent production, the nonrivalrous nature of intangible goods means that a public domain can be used to foster incremental innovation, which is much more valuable. This Note takes a different direction than previous scholarship by focusing on another of Locke's natural law principles, the waste prohibition. The waste prohibition forbids a laborer from wasting products of labor or portions of such products, with the violation resulting in the loss of private property rights in the portion of the product wasted. I define Lockean waste in the following way: Waste occurs where a unit of a product of labor is not put to any use. When scholars have considered the application of the waste prohibition to intangible goods previously, they have arrived at polar conclusions, with some asserting that waste rarely occurs and others claiming that waste always occurs. The waste prohibition is of negligible importance for tangible goods, but is immensely important when constructing a Lockean theory of intangible goods. The waste prohibition is largely a nonissue for tangible goods because one can exchange money--by definition a nonwasting good--for units of a product of labor that may be prone to waste. Laborers will thus have incentives to sell all the units they possess that they will not use and violations of the waste prohibition will be rare. The nonrivalrous nature of intangible goods can be characterized as the production of an unlimited number of "intangible units" at the initial creation of any intangible good. Although the limited number of units of a tangible good can usually be converted into nonwasting money, the unlimited number of intangible units suggests that the laborer will not be able or willing to convert all of the intangible units into money whenever any intangible good is produced. The combination of nonconversion and nonuse constitutes a violation of the waste prohibition. As the waste prohibition is enforced through the loss of property rights in the wasted intangible units, the waste prohibition creates what I call a Lockean fair use right. Price discrimination allows greater conversion of intangible units into money but is an imperfect solution due to practical difficulties in attaining perfect price discrimination. This Note also examines the implications of government regulation on Lockean intellectual property rights and compares a Lockean regime with current U.S. intellectual property doctrine and theory. The establishment of a government allows much more variety in the scope of private property rights under Lockean theory, but the Lockean fair use right binds civil governments in much the same way that it binds individuals in the state of nature. Although the theory and doctrine of copyright fair use shares many characteristics with Lockean fair use, the current U.S. fair use right is more limited than the Lockean right. One example considered in this Note is that strong government support for anticircumvention measures may violate Lockean principles if the ability to police the waste prohibition is not protected. An even larger difference is that there is no coherent patent fair use right in the United States, although such a right would be demanded under a Lockean regime. This argument will be fleshed out in the remainder of this Note. Part I introduces general Lockean concepts, focusing on the impacts of the nonrivalry of intangible goods on the common and the waste prohibition. Part II applies Lockean concepts in an economic framework, demonstrating a fair use right in a Lockean state of nature. Part III considers the transition of society into a civil government, with its attendant changes in the scope of property rights in intangible goods. Part III also applies the Lockean analysis of this Note to two areas of current intellectual property debate--the anticircumvention provisions in the Digital Millennium Copyright Act (DMCA) and the enforcement of drug patents in developing countries. Part IV concludes.
Why Tax the Rich? Efficiency, Equity, and Progressive Taxation
111 Yale L.J. 1391 (2002) In Greek mythology, Atlas was a giant who carried the world on his shoulders. In Ayn Rand's 1957 novel Atlas Shrugged, Atlas represents the "prime movers"--the talented few who bear the weight of the world's economy. In the novel, the prime movers go on strike against the oppressive burden of excessive regulation and taxation, leaving the world in disarray and demonstrating how indispensable they are to the rest of us (the "second handers"). Rand wrote in a world in which the top marginal federal income tax rate in the United States was 91% (beginning at taxable income of $400,000). This is an unimaginably high rate by today's standards, when the dominant view in Washington is that a marginal rate of 39.6% (the top rate from 1993 to 2001) is too high. The key turning point in the process of abandoning high marginal tax rates occurred in the presidency of Ronald Reagan. When Reagan became President in 1981, the top marginal federal income tax rate was 70%; when he left office in 1989, the top rate was 28%. The reduction of marginal tax rates in the Reagan years was driven by a new policy consensus that still persists today. That consensus is that high marginal tax rates on the rich come with an unaffordably high price for the U.S. economy in the form of reduced incentives for the rich to work and to save, and increased incentives to engage in socially wasteful tax planning. And yet 1957, when Rand wrote Atlas Shrugged and the top income tax rate was 91%, falls in the middle of the period from 1951 through 1963. Those were the golden years of the U.S. economy, in which the average annual rate of productivity growth was 3.1% (compared with about 1.5% after 1981). Of course, the growth might have been even faster had the marginal tax rates been lower, but the coincidence of high rates and high productivity raises challenging questions for those who believe that high marginal tax rates carry an unacceptable cost. Thus, the question of whether high marginal tax rates come with an unaffordably high cost to the U.S. economy remains unsettled. Does Atlas Shrug?, a recent collection of papers written mostly by public finance economists and superbly edited by Joel Slemrod, represents the most recent attempt to answer this question. Unfortunately, no clear-cut answer is forthcoming in the book, and the debate is sure to rage on. This Review is divided into three Parts. In Part I, I summarize the main findings of Does Atlas Shrug?, emphasizing their contribution to the debate on taxing the rich. In Parts II and III, I discuss a question that is only briefly touched on in the book: Why should the rich be taxed? Part II surveys the existing--and to me incomplete--legal literature on this issue, while Part III begins to outline some tentative alternative answers. In my view, the debate about the economic consequences of taxing the rich has obscured this fundamental normative question, and answering it is essential to assessing the merits and relevance of the findings contained in Slemrod's book.
Architecture as Crime Control
111 Yale L.J. 1039 (2002) Building on work in architectural theory, Professor Katyal demonstrates how attention to cities, neighborhoods, and individual buildings can reduce criminal activity. The field of cyberlaw has been transformed by the insight that architecture can regulate behavior in cyberspace; Professor Katyal applies this insight to the regulation of behavior in real space. The instinct of many attorneys is to focus on criminal law as the dominant method of social control without recognizing physical constraints--constraints that are sometimes even shaped by civil law. Ironically, even an architectural problem in crime control--broken windows--has prompted legal, not architectural, solutions. The Article considers four architectural concepts: increasing an area's natural surveillance, introducing territoriality, reducing social isolation, and protecting potential targets. These mechanisms work in subtle, often invisible, ways to deter criminal activity and, if employed properly, could stymie the need for architectural self-help solutions that are often counterproductive because they increase overall crime rates. Professor Katyal then illustrates specific legal mechanisms that harness the power of architecture to prevent crime. Distinguishing situations where the government acts as a builder, as a civil regulator, and as a criminal enforcer, the Article suggests solutions in a variety of legal fields, drawing on property, torts, taxation, contracts, and criminal law. Procurement and taxation strategies can promote effective public architecture; crime impact statements, zoning, tort suits, and contractual regulation may engender private architectural solutions as well. Criminal law, particularly through forfeiture, may also play a role. Several problems with architectural regulation are considered, such as the extension of social control and potential losses in privacy. Professor Katyal concludes by suggesting that local jurisdictions devote more attention to architecture as a constraint on crime instead of putting additional resources toward conventional law enforcement.
Givings
111 Yale L.J. 547 (2001) Givings-government acts that enhance property value-are omnipresent. Yet they have received scant scholarly attention and no consistent doctrinal or theoretical treatment. Although givings and takings are mirror images of one another and are of equal practical and theoretical importance, takings have hogged the scholarly limelight. This Article seeks to rectify this disparate treatment and takes the first steps toward a law of givings. The Article divides the universe of givings into three prototypes: physical givings, regulatory givings, and derivative givings. It shows that givings are a formative force in the world of property, and that a comprehensive takings jurisprudence must take account of givings and their relationship to takings. The Article then 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 some essential features of takings law and combining them with efficiency, fairness, and public choice analysis, the Article proposes four conceptual clusters, each embodying a distinct aspect of a potential givings jurisprudence. The first cluster identifies givings that can be characterized as reverse takings. The second separates singled-out givings from majoritarian givings. The third distinguishes between refusable and nonrefusable givings. The fourth and final differentiates between givings that are directly linked to particular takings and givings that are not. Finally, the Article incorporates policy guidelines from the clusters in a three-step model that identifies, assesses, and charges for givings, thereby suggesting the practicality of a law of givings.
What Happened to Property in Law and Economics?
111 Yale L.J. 357 (2001) Property has fallen out of fashion. Although people are as concerned as ever with acquiring and defending their material possessions, in the academic world there is little interest in understanding property. To some extent, this indifference reflects a more general skepticism about the value of conceptual analysis, as opposed to functional assessment of institutions. There is, however, a deeper reason for the indifference to property. It is a commonplace of academic discourse that property is simply a "bundle of rights," and that any distribution of rights and privileges among persons with respect to things can be dignified with the (almost meaningless) label "property." By and large, this view has become conventional wisdom among legal scholars: Property is a composite of legal relations that holds between persons and only secondarily or incidentally involves a "thing." Someone who believes that property is a right to a thing is assumed to suffer from a childlike lack of sophistication--or worse. One might think that law and economics scholars would take property more seriously, and at first glance this appears to be true. Analysis of the law from an economic standpoint abounds with talk of "property rights" and "property rules." But upon closer inspection, all this property-talk among legal economists is not about any distinctive type of right. To perhaps a greater extent than even the legal scholars, modern economists assume that property consists of an ad hoc collection of rights in resources. Indeed, there is a tendency among economists to use the term property "to describe virtually every device--public or private, common-law or regulatory, contractual or governmental, formal or informal--by which divergences between private and social costs or benefits are reduced." In other times and places, a very different conception of property has prevailed. In this alternative conception, property is a distinctive type of right to a thing, good against the world. This understanding of the in rem character of the right of property is a dominant theme of the civil law's "law of things." For Anglo-American lawyers and legal economists, however, such talk of a special category of rights related to things presumably illustrates the grip of conceptualism on the civilian mind and a slavish devotion to the gods of Roman law. Or does it? In related work, we have argued that, far from being a quaint aspect of the Roman or feudal past, the in rem character of property and its consequences are vital to an understanding of property as a legal and economic institution. Because core property rights attach to persons only through the intermediary of some thing, they have an impersonality and generality that is absent from rights and privileges that attach to persons directly. When we encounter a thing that is marked in the conventional manner as being owned, we know that we are subject to certain negative duties of abstention with respect to that thing--not to enter upon it, not to use it, not to take it, etc. And we know all this without having any idea who the owner of the thing actually is. In effect, these universal duties are broadcast to the world from the thing itself. Because property rights create duties that attach to "everyone else," they provide a basis of security that permits people to develop resources and plan for the future. By the same token, however, this feature of property imposes an informational burden on large numbers of people, a burden that goes far beyond the need for nonparties to a contract to understand the rights and duties of contractual partners. As a consequence, property is required to come in standardized packages that the layperson can understand at low cost. This feature of property--that it comes in a fixed, mandatory menu of forms, in contrast to contracts that are far more customizable--constitutes a deep design principle of the law that is rarely articulated explicitly. The fact that the in rem aspect of property has largely disappeared from academic discourse has made this latent design principle all the easier to overlook. This Essay will trace the decline of the conception of property as a distinctive in rem right in Anglo-American thought, and the rise of the view among modern legal economists that property is simply a list of use rights in particular resources. As is the case with law and economics more generally, this view of property finds its roots in Ronald Coase's seminal article, The Problem of Social Cost. Coase implied that property has no function other than to serve as the baseline for contracting or for collectively imposing use rights in resources, and he modeled conflicts over the use of resources exclusively in terms of bipolar disputes between A and B. Wittingly or not, this gave rise to a conception of property as a cluster of in personam rights and hastened the demise of the in rem conception of property. In order to appreciate Coase's impact on the modern understanding of property rights, we begin, in Part II, with a brief overview of the traditional conception of property and the legal realists' advocacy of the alternative "bundle of rights" conception. Once the stage is set, we then turn, in Part III, to Coase's work, where we take a fresh look at his classic article and a companion piece in an effort to uncover the implicit conception of property rights that animates his theory. We conclude that Coase adopts an extreme version of the bundle-of-rights conception of property favored by the legal realists; in effect, Coase conceives of property in terms of a list of permitted and prohibited uses of particular resources. This is followed, in Part IV, by a selective review of post-Coasean treatments of property in law and economics scholarship, where we find the list-of-uses conception carried forward in a variety of guises. In Part V, we briefly consider some areas in which an explicit recognition of the in rem dimension of property would enrich the understanding of property issues by law and economics scholars. Part VI concludes.
The Liberal Commons
110 Yale L.J. 549 (2001) Must we choose between the benefits of cooperative use of scarce resources and our liberal commitments to autonomy and exit? No. Well-tailored law can mediate between community and liberty, between commons and private property. Our theory of the liberal commons provides a framework to reconcile these seemingly contradictory moral imperatives and analytic categories. In our definition, an institution succeeds as a liberal commons when it enables a limited group of people to capture the economic and social benefits from cooperation, while also ensuring autonomy to individuals through a secure right to exit. This Article shows how current theories and categories obscure the most difficult tradeoffs in managing commons resources; then details our liberal commons model comprising the decisionmaking spheres of individual dominion, democratic self-governance, and cooperation-enhancing exit; and finally presents a case study to show how our approach can enrich legal and social inquiry.
Optimal Standardization in the Law of Property: The Numerus Clausus Principle
110 Yale L.J. 1 (2000) In all postfeudal legal systems, the basic ways of owning property are limited in number and standardized, in the sense that courts will enforce as property only interests that are built from a list of recognized forms. In the common law, this principle has no name and is invoked only semiconsciously; it is known in the civil-law tradition as the numerus clausus. This Article adopts this term for the corresponding understanding in the common law and advances an information-cost theory that explains the ubiquity and durability of the doctrine. The numerus clausus can be seen at work in a variety of areas, including estates in land, concurrent interests, nonpossessory interests, interests in personal property, and intellectual property. This Article argues that the principle serves to reduce third-party information costs throughout the law of property. Because of their in rem nature, property rights give rise to third-party information costs in a way that contract rights do not. Individuals trying to avoid violating property rights or investigating whether to acquire them need to gather information. Those creating property rights will in some situations have too little incentive to conform to the most popular forms, requiring a degree of mandatory standardization. As it operates in practice, the numerus clausus strikes a rough balance between the costs of frustrating parties' objectives on the one hand and the costs of complicating third-party information-gathering on the other. This Article demonstrates that this information-cost theory provides a better account for the numerus clausus than do alternative positive and normative views, including those based on network effects, sufficiency of notice, private standards, antifragmentation concerns, and the increasing importance of contract-based rights. Finally, this Article shows that, because it tends to preclude judicial innovation in the basic forms of property rights, the numerus clausus acts as an institutional-choice mechanism that channels to legislatures the power of innovation in the realm of property rights. In keeping with the basic information-cost theory, legislative creation and abolition of property rights is likely to lead to lower information costs than would judicial entrepreneurship in this area.