Ben Depoorter

Technology & Torts: A Theory of Memory Costs, Nondurable Precautions and Interference Effects

Ben Depoorter — Wed, 13 Jul 2011 19:12:01 PDT

This Article examines the influence of nondurable precaution technologies on the expansion of tort awards. We provide four contributions to the literature. First, we present a general, formal model on durable and non-durable precaution technology that focuses on memory costs. Second, because liability exposure creates interference, we argue that tort law perpetuates the expansion of awards. Third, because plaintiffs do not consider the social costs of interference effects, private litigation induces socially excessive suits. Fourth, while new harm-reducing technologies likely increase accident rates, such technologies also raise the ratio of trial costs to harm, leaving undetermined the overall effect of new technologies on the rate of litigation.

Tort Law and Probabilistic Litigation: How to Apply Multipliers to Address the Problem of Negative Value Suits

Ben Depoorter — Wed, 13 Jul 2011 19:08:16 PDT

This Article advances a proposal that brings to life valuable lawsuits that litigation costs currently discourage. Our proposal converts claims with negative expected values into positive expected value claims by implementing a novel system involving flexible conditional multipliers. Our proposal has two components. First, under the proposed system a plaintiff is allowed to select a damage multiplier that determines the amount of damages the plaintiff will receive if the litigation is successful. Second, courts select cases for litigation randomly with a probability inverse to the multiplier the plaintiff selected.

Technology & Uncertainty: The Shaping Effect on Copyright Law

Ben Depoorter — Wed, 13 Jul 2011 19:04:10 PDT

This Article examines the symbiotic relationship between copyright law and technology. I describe how an environment characterized by rapid technological change creates two conditions that determine the direction and evolution of copyright law: legal delay and legal uncertainty. I explain how uncertainty over the application of existing copyright law to newly emerging technology catalyzes the actions of copyright owners and users. I argue that uncertainty and delay (1) have an enabling effect on anticopyright sentiments, (2) lead to a greater reliance on self-help efforts by content providers and users, and (3) induce legislative involvement in copyright law. In the final Part of this Article, I consider how the framework of technological uncertainty and delay helps to explain a number of emerging issues in copyright law. I conclude by providing normative proposals for copyright reform. These proposals relate to the choice between standards and rules, as well as the role of courts, legislators, and administrative agencies in the development of copyright law.

Law in the Shadow of Bargaining: The Feedback Effect of Civil Settlements

Ben Depoorter — Wed, 13 Jul 2011 19:00:14 PDT

Lawmakers, courts, and legal scholars often express concern that settlement agreements withhold important information from the public. This Essay identifies, to the contrary, problematic issues involving the availability of information on non-representative settlements. The theoretical and empirical evidence presented in this Essay demonstrates that, despite the widespread use of nondisclosure agreements, information on settlements is distributed both inside and outside legal communities, reaching actors through various channels including the oral culture in legal communities, specialized reporters, professional interest organizations, and media coverage. Moreover, information on private settlement agreements circulates more widely if the agreed compensation in a given settlement exceeds the expected value of the claim at trial. For example, professional organizations highlight novel settlements that are strategically important to lawyers, and special interest groups bring attention to extravagant settlements that are most likely to induce legislative action.

The selective availability of information on outlier settlements increases the potential impact of settlement agreements. For instance, in tort disputes, individual settlement concessions make it harder for similarly situated defendants to deflect forthcoming claims. Ambitious trial lawyers will use prior settlements as minimum bargaining thresholds. Plaintiffs in future cases become more demanding and more reluctant to accept settlements below what others have agreed to in prior, analogous settlements. Moreover, due to their noncoercive nature, settlements may frame the normative outlook on particular claims or disputes. Consequently, settlement trends may become normative benchmarks to judges and juries that seek to reinforce such valuations in settlement conferences or trials. The settlement dynamics identified in this Essay provide a novel inroad for possible research on the evolution of remedies and damages in various areas of law.

Copyright Backlash

Ben Depoorter — Wed, 13 Jul 2011 18:54:03 PDT

In the past decade the entertainment industry has waged a legally very successful campaign against online copyright infringements. In a series of high profile decisions, content industries persuaded courts to accept expansive interpretations of contributory enforcement, to create novel doctrines of copyright infringement, and to apply broad interpretations of statutory damage provisions. Many private file-sharers, technology companies, university administrators and Internet service providers have felt the reach of this litigation effort. Yet a significant empirical anomaly exists: even as the copyright industry has ramped up the level of deterrence, online copyright infringements continue unabated.

Why has the legal battle against file-sharers been so ineffective? The most straightforward explanation is that infringers are not deterred, either because the probability of getting caught remains remote or because the sanctions are not sufficiently salient. If that is the case, the expansive statutory damage award remedies in recent decisions such as Capitol Records v. Thomas-Rasset and Sony BMG v. Tenebaum, carry renewed promise for the entertainment industry.

In this Article we claim that this deterrence-based approach will prove futile and even counterproductive to the goals of copyright holders. We argue that copyright law faces conditions similar to Prohibition and other historical episodes of enforcement failure. When infringements are widespread, effective deterrence cannot be attained without raising enforcement to levels that undermine the support for the underlying rules. As a result, enforcement has the inadvertent effect of moving behavior in the opposite direction from that intended by the law. In the context of copyright law, enforcement has increased the gap between the social and legal perceptions of copyright law. Because file sharers, as a group, perceive copyright litigation as excessive, this inadvertently strengthens opposition to the legally protected interests of copyright law.

To further our understanding of the interplay between enforcement and public attitudes, we conduct two empirical studies on norms and copyright law. The results confirm that copyright enforcement is a double-edged sword. While stringent sanctions have a modest deterrent effect on file-sharing behavior, they increase anti-copyright sentiments among frequent offenders. This raises a spectacular challenge for copyright enforcement-the more copyright owners push to step up sanctions for copyright infringements; the more the public resents the protected rights. Consequently, stepping up sanctions tends to increase - rather than decrease - the rate and frequency of infringing activities. Our key results suggest therefore, that more stringent copyright enforcement will further erode respect for copyrights and may prove counterproductive to copyright owners.

Fair Trespass

Ben Depoorter — Wed, 13 Jul 2011 18:50:58 PDT

Trespass law is commonly presented as a relatively straightforward doc- trine that protects landowners against intrusions by opportunistic trespass- ers. Though widely supported in academic commentary and scholarship, this conventional viewpoint of trespass law lacks empirical and analytical grounding. In fact, the interests involved in trespass disputes often extend beyond the interests of a private landowner, affecting broad societal interests such as the free flow of information, public safety and health, and similar considerations.

This Essay attempts to align these observations with a doctrine more attuned to reality. To that end, it develops a new doctrinal framework for determining the limits of a property owner’s right to exclude. Adopting the doctrine of fair use from copyright law, the Essay introduces the concept of “fair trespass” to property law doctrine. When deciding trespass disputes, courts should evaluate the following factors: (1) the nature and character of the trespass; (2) the nature of the protected property; (3) the amount and substantiality of the trespass; and (4) the impact of the trespass on the owner’s property interest.

The main advantages of this proposal are twofold. First, this novel doctrine more carefully weighs the interests of society in access against the interests of property owners in exclusion. Second, by replacing the existing patchwork of ad hoc situations where courts excuse trespassory acts, this proposal provides a more coherent and consistent context in which to adjudicate trespass conflicts. By developing a balancing test to assess trespass claims, the proposed doctrine seeks to protect the rights of property owners on the basis of a more explicit and predictable framework, while at the same time safe- guarding the societal interests in access.

The Market for Copyrights: The Price Theory of Copyright Collectives

Ben Depoorter et al. — Sun, 04 Mar 2007 03:20:43 PST

This paper applies a model of complementary oligopoly and anticommons pricing to the market for intellectual property rights. Our model demonstrates a surprising and interesting overlooked result: In the market for complementary goods, price coordination and monopolistic pricing do not necessarily represent inefficient equilibria, when compared to the alternative Nash equilibrium. Due to the peculiar cross-price effects in the supply of complementary goods, price coordination and monopolistic supply often constitute an improvement over the alternative equilibrium outcomes. To be precise, the welfare effects of competition and price coordination depend on the nature of the intellectual product concerned. This has significant and obvious implications for the economic analysis of copyright collectivization, as well as for antitrust regulation in this area.

Fair Use and Copyright Protection: A Price Theory Explanation

Ben Depoorter et al. — Sun, 04 Mar 2007 03:16:59 PST

Copyright scholars suggest that computer technology has reduced transaction costs associated with copyright transfer, allegedly eliminating the need for the fair use doctrines that were developed to allow limited use of copyrighted material in situations where the transaction costs of securing authorized use would be prohibitive. According to this emerging view, in an ideal world with no contracting costs, third party use of copyrighted material could realistically only take place with the express consent of the copyright holder. This would give the author absolute power to dispose of his work, including the right to veto uses, without the possibility of a fair use override of any sort. This paper shows the limits of such transaction-cost based arguments. If transaction costs provide the dominant economic justification of fair use doctrines, an exogenous reduction of such transaction costs would limit the scope and application of the defense of fair use. Nevertheless, in this paper we suggest that, when viewed in light of the anticommons theory, fair use doctrines retain a valid efficiency justification even in a zero transaction cost environment. Fair use defenses are justifiable, and in fact instrumental, in minimizing the welfare losses prompted by the strategic behavior of the copyright holders. Even if copyright licenses can be transferred at no cost (for instance, in a click and pay frictionless computer world), the strategic behavior of the copyright holders would still create possible deadweight losses. In this context we identify a number of critical variables that should guide and constrain the application of fair use doctrines. These variables include (a) the number of copyright holders; (b) the degree of complementarity between the copyrighted inputs; (c) the degree of independence between the various copyright holders in the pricing of their licenses; and (d) ability to price discriminate.

Duality in Property: Commons and Anticommons

Norbert Schulz et al. — Sun, 04 Mar 2007 03:00:30 PST

Commons and Anticommons problems are the consequence of symmetric structural departures from a unified conception of property. In this paper, we endeavor to provide a dual model of property, where commons and anticommons problems are the consequence of a lack of conformity between use and exclusion rights. The general model is then extended to consider the different equilibria obtained under vertical and horizontal cases of property fragmentation. The paper concludes formulating a hypothesis of legal rules for promoting unity in property.

Norms and Enforcement: The Case against Copyright Litigation

Ben Depoorter — Sun, 04 Mar 2007 02:46:58 PST

Drawing on socio-psychological literature and new data from an empirical study, this Article posits that copyright litigation faces an impossibility theorem: lawsuits against file sharers cannot simultaneously achieve effective deterrence and promote pro-copyright norms. Anti-copyright norms of file swappers are strengthened when the level of copyright enforcement increases, which results in more downloading whenever enforcement is temporarily suspended. Enforcement has an ambivalent effect on individuals who have no experience with file sharing. Severe sanctions do not have a counterproductive effect on copyright norms of such non-file sharers, yet exposure to information on copyright enforcement reinforces the belief or expectation that others are downloading. The Article reflects on the lessons learned from the study, in particular with regard to the policy choices that regulators, courts, and copyright-dependent industries face when approaching the widespread use of copyrighted material on file-sharing networks. These options, including criminal prosecutions of digital piracy, copyright education, self-help strategies, and collective licensing, are evaluated in light of the interaction of deterrence and anti-copyright norms.

From 'Tragedy' to 'Disaster': Welfare Effects of Commons and Anticommons Dilemmas

Sven Vanneste et al. — Sun, 04 Mar 2007 02:42:25 PST

In this paper, we explore the alleged symmetry between commons and anticommons dilemmas. Our experimental results reveal an interesting asymmetry. Anticommons situations generate greater opportunistic behavior than an equivalent commons dilemma (Study 1), and anticommons dilemmas yield a greater risk for underuse compared to commons dilemmas (Study 2). The results of the present study bring to light important deviations from the economic model, suggesting that other factors, such as behavioral attitudes towards property and psychological variables, affect cooperation differently in anticommons and commons dilemmas. Our findings complement the existing experimental literature on commons dilemmas and contradict the presumed economic symmetry of commons and anticommons problems. The identification of relevant parameters constitutes an interesting line of future research. Such research could identify the parameters that differentiate between the behavioral outcomes imposed by the two dilemma types, and identify subjective factors that underlie people’s behavior in anticommons dilemmas. Our research attests to the potential gravity of the anticommons problem, and we conclude that it is inadequate to extrapolate findings from the commons to the anticommons dilemma.

Horizontal Political Externalities: the Supply and Demand of Disaster Management

Ben Depoorter — Sun, 04 Mar 2007 02:35:42 PST

This Article discusses the dynamics of shared political accountability and provides a supply- and demand-side analysis of disaster management. Because multiple levels of government share political accountability in national scale disasters, disaster management is subject to a collective action problem. Introducing the concept of horizontal political externalities, this Article explains the shortcomings of disaster management in terms of asymmetric political accountability costs for ex ante preparedness and ex post relief. In the presence of shared accountability, investments in prevention and relief by one government actor confer positive externalities upon other government actors by reducing the overall chance of being held responsible in ensuing disasters. In contrast, ex post disaster relief involves negative externalities when action by one agency makes other agencies or representatives look worse. Because positive externalities are undersupplied and negative externalities are oversupplied, political externalities distort disaster management policy. When political accountability is shared, no single actor bears the full brunt of accountability. In addition, uncertainty and finger pointing reduce the total sum of political accountability. The different effects of ex ante and ex post disaster management on political accountability may shed light on events before and after Hurricane Katrina. I provide suggestions for further avenues of empirical and theoretical research on this new positive political theory of horizontal political externalities and political accountability losses.

Whistle Blowing

Ben Depoorter et al. — Sun, 04 Mar 2007 02:21:34 PST

For law enforcement purposes corruption and fraud are hard battles. Because of the highly secretive and premeditated nature of these crimes, prime witnesses are themselves often implicated in the fraudulent transaction. Promises of immunity and whistle blowing rewards are often required to resolve these information asymmetries. These insights have set a trend, both in scholarship and law enforcement practice, towards reward-based approaches (carrots), as an alternative or complement to punishment based deterrence (sticks). Applying the U.S. False Claims Act (FCA) as an analytical framework, we provide a critical review of the efficiency limitations of whistle blowing. More specifically, the formal model developed in this contribution, reveals a gap between social and private incentives in whistle blowing, both with regard to the decision to pursue litigation and the timing of whistle blowing. First, while an insider will blow the whistle whenever his expected recovery exceeds the expected costs of litigation, enforcement agencies seek to optimize enforcement in the long run. The autonomy of whistle blowers to pursue claims without government involvement, weakens the government's bargaining position and obstructs the government's ability to weigh in wider factors of enforcement (the effect of an individual case on a multiple claim suit, etc.). Second, whenever rewards are tied to recovery, bounty awards create a perverse incentive whereby fraudulent practices are not terminated at a socially optimal point in time. The potential race among whistle blowers cannot mitigate this effect fully because the stigma and loss of opportunities on the job market act as internal constraints on whistle blowing.

Putting Humpty Dumpty Back Together: Pricing in Anticommons Property Arrangements

Ben Depoorter et al. — Sun, 04 Mar 2007 02:21:33 PST

Recently, a new theory has drawn considerable attention in the literature on common property. A number of scholars have pointed to the danger of excessive propertization in the context of what are termed "anticommons" property regimes. Although this theory has found its way into numerous legal and economic applications, the empirical and cognitive foundations of the theory of fragmentation remain unexplored. Based on experimental data, this Article conducts an investigation into the social and personal processes involved in the anticommons.

The results confirm the theoretical proposition that anticommons deadweight losses increase with the degree of complementarity between individual parts and with the degree of fragmentation.

Our study also provides three novel insights into the problem of fragmentation. First, the data illustrate that individual right holders base their reservation price on a proportion of the expected surplus of the bundler-purchaser, disregarding the objective value of the resource. Second, the experiments suggest that uncertainty amplifies the anticommons pricing effect. Individual right holders ignore the expected value of the purchaser’s project, and instead focus on the upper range of profitability and surplus. Willingness to accept is anchored onto a proportion of the maximum profitability, rather than a proportion of the expected benefits of the project. Finally, throughout the experiment reservation prices seem to be consistently lower in cases where there exists large uncertainty within the range of positive outcomes, relative to scenarios where there is relative certainty regarding a positive outcome but which includes the possibility of a (modest) negative outcome. Subjects seem to emphasize the relative low probability of success over the possibility of a negative outcome.

The experiment provides clear indications of the pricing effect in settings where complementary units are fragmented over individual right holders. Given the stickiness of initial selling prices, and the prospective costs of the required negotiations to drive prices down to the expected value of the project, value maximizing projects might be abandoned, leading to the tragic outcome of under use or idleness. The results thus reinforce the normative hypothesis of the anticommons: property right systems should be careful in allowing the liberal creation and fragmentation of property rights.

Modernization of European Antitrust Enforcement: The Economics of Regulatory Competition

Ben Depoorter et al. — Sun, 04 Mar 2007 02:21:33 PST

In this article we analyze the expected effects of regulatory overlap in European competition law resulting from Regulation 1/2003. Drawing upon recently developed economic theories of regulatory competition, our model foresees a number of qualitative adjustments resulting from this reform. On one hand, the direct applicability of the exemption provision should increase the overall amount of exemptions. On the other hand, a decentralized system permits private litigants' forum shopping, and parallel enforcement by multiple national competition authorities will drive up the number of infringement findings. Although the precise direction of substantive competition law is unclear, the overall effect is higher levels of regulatory activity. This entails not only greater administrative costs but also suggests increased transaction costs for doing business in the post-Regulation 1/2003 European Union.

The Several Lives of Mickey Mouse: The Expanding Boundaries of Intellectual Property Law

Ben Depoorter — Sun, 04 Mar 2007 02:21:33 PST

This article develops a theory of legal evolution that links private property right allocations in intellectual property goods to changes in economic values arising from developing technology. Rather than simply resulting from interest group pressure and rent-seeking, the emergence of intellectual property rights is best described as a response to increasing economic value and diminishing transaction costs, resulting from synergies between new technologies and intellectual content. In this process of legal change in intellectual property, the inherent uncertainty as to the usefulness of technology in protecting content leads to increased efforts of legislative and judicial capture by both content providers and consumers. The resulting social mechanism predicts a back and forth of the legal allocation of use rights between producers and users. As a matter of allocative efficiency, however, there exists considerable friction between the "multi-component" or complementary nature of works and the continued extension of property right-protection to increasingly smaller units of intellectual and scientific creation. As an economic model of fragmentation demonstrates, the uncoordinated exercise by right holders of their exclusion rights might lead to sub-optimal levels of production. In light of this, doctrines of fair use, blocking patents, equivalent patents, and generic trademarks serve as important points of moderation of the deadweight losses that might ensue when dealing with the uncoordinated exercise of control rights over complementary property rights

Simultaneous and Sequential Anticommons

Francesco Parisi et al. — Sun, 04 Mar 2007 02:21:33 PST

This paper defines a framework for anticommons analysis based on the fragmentation of property rights. In differentiating between sequential and simultaneous cases of property fragmentation, we describe and assess the equilibria obtained under each scenario. Our model reveals how the private incentives of excluders do not capture the external effects of their decisions. Moreover, our model suggests that the result of underutilization of joint property increases monotonically in both (a) the extent of fragmentation; and (b) the foregone synergies and complementarities between the property fragments. Within this context, we can therefore explore important implications for possible institutional responses to a range of issues raised by the concept of property fragmentation.

Fragmentation of Property Rights: A Functional Interpretation of the Law of Servitudes

Ben W.F. Depoorter et al. — Sun, 04 Mar 2007 02:21:33 PST

This Article argues that recent developments in economic theory provide a new rationale for the dichotomous approach of land use arrangements in the law of servitudes that is almost universal in the modern Western legal tradition. The treatment of certain land-related promises as enforceable contracts between parties, rather than real rights that run with the land in perpetuity, can be explained as an attempt to minimize the transaction and strategic costs resulting from dysfunctional property arrangements. As demonstrated by the Authors, benchmark doctrines such as ‘touch and concern,’ and the civil law principles of ‘prediality’ and numerus clausus, have served as instruments to limit excessive or dysfunctional fragmentation of property rights. Section I of this Article describes the dichotomous approach of land use arrangements in the law of servitudes in Common Law and Civil Law systems. Section II provides a functional explanation of the legal rules in this area. Section III documents and explains the changing approach to land use law in both Common Law and Civil Law jurisdictions. Section IV discusses the role of property law in a changing economy. Section V reflects on the appropriate scope of freedom of contract in the law of servitudes. Section VI concludes.