Yet some things remain. Among them are the name and facts of Palsgraf v. Long Island Railroad Co., one of the most memorable cases in all of American common law. A great judge, Benjamin Cardozo, penned the majority opinion.

The facts of Palsgraf stick in our minds because Judge Cardozo helpfully outlined them in his very first paragraph. Two men rushed to catch a moving train. One made it easily. The other, carrying a nondescript package covered in newspaper, teetered near the open door. A guard held the door open and reached out to steady him, causing the package to fall on the rails. The package turned out to contain fireworks, which exploded. The resulting shock wave “threw down some scales at the other end of the platform, many feet away.” The falling scales injured the plaintiff, who sued the railroad for negligence. These odd facts—a law professor’s bizarre hypothetical come to life—survive the passage of time and stick in memory.

Yet time and custom have distorted Judge Cardozo’s opinion. We remember the case as one about proximate cause. Indeed, casebooks (at least in my student days) used Palsgraf to introduce us to that element of torts. Judge Cardozo, however, apparently thought the case was about duty and culpability, to which he devoted nearly all of his opinion.

Cardozo wrote that there could be no duty to plaintiff unless the risk of injury to her was reasonably foreseeable. In other words, the railroad owed the plaintiff no duty unless its employee could reasonably foresee the danger to her and so was culpable in failing to avoid it.

Only in dictum, in his penultimate paragraph, did Judge Cardozo address (and dismiss) the issue of proximate cause, writing “[w]e do not go into the question now.” That issue, he opined, was really a matter of damages: the remedy, not liability. Yet, over the years his opinion has become a symbol of the very thing he did not decide. Today we no longer consider proximate cause an element of remedy alone; it has become an element of the tort. Right and remedy are now inextricably intertwined, as befits a legal system that tries to provide no right without a remedy.

Although bizarre, the simple facts of Palsgraf are worlds away from the technological complexity of the Internet, on-line file sharing, and Web-spread pornography. But the fundamental things apply. In a world where corporations are still legal abstractions and liability necessarily falls ultimately on people, we are reluctant to impose tort liability without evidence of proximate cause and culpability.

Infringement of intellectual property (IP) is just a kind of tort. The “duty” to respect IP falls on the entire world, independent of contract and privity—a breadth of application characteristic of torts. Yet, duties must have their limits. They cannot extend so far outward that tendrils of unforeseen and unforeseeable liability infiltrate every part of our complex, interdependent economy.

Judge Cardozo wrestled with how far along a railroad platform liability for dropping a package containing dangerous but hidden items should extend. Just so, courts today must decide how far out on the web of Internet commerce infringement liability must extend. Their decisions inevitably involve proximate cause.

Insofar as culpability is concerned, IP infringement cases differ from other tort cases in one important respect. Primary or direct liability for infringement has always been a strict-liability offense, independent of culpability and the infringer’s intent or state of mind. Yet, secondary liability—contributory infringement, inducement liability and vicarious liability—is not so limited. As court after court has addressed novel issues of secondary liability, it has fallen back on the tried and true notion of culpability. The Supreme Court itself did so in creating a cause of action for intentional inducement of copyright infringement out of whole common-law cloth.

Even the struggle to reconcile culpability with the strictness of direct liability is not new. Judge Cardozo wrestled with the very same question in Palsgraf. For him, the difficulty was reconciling the notion of culpability with the fact that negligence was and is a non-intentional tort. His decision earned a place in law school casebooks by creating a modified version of culpability for cases of negligence: failure to recognize and avoid foreseeable harm. By introducing the notion of foreseeability, Judge Cardozo recognized the non-deliberate nature of negligence but avoided the unfortunate consequence of unlimited liability for remote and unpredictable harm. His decision has come to stand for a simple but very general principle: prudential judicial reluctance to let liability extend too far.

This short paper attempts to show how courts can build—and are building—a rational jurisprudence of secondary liability for IP infringement upon the foundation of these two great common-law principles of tort law: proximate cause and culpability. Besides this introduction (Part I), the paper has four sections. Part II discusses the notion of proximate cause and its application to cases assessing liability for IP infringement. It also explores a modern, economic test for proximate cause: the concept of least-cost avoider. Part III discusses the principle of culpability in cases of secondary liability and how to reconcile it with the traditional strictness of primary liability. Part IV concludes with some observations about how decisions based on the probable consequences of alternative legal rules (Dare I say, “policy”?), still lurking in this obscure, nerdy field of IP, might some day re-emerge to give the common law new life.

To provide the needed incentives, Mr. Dratler propose that the patent laws be revised to divide ownership of patent rights in an invention between inventor and employer, according to how much "extraordinary'" effort each has invested in the innovative process. Such division would be accomplished through private bargaining between inventor and employer, with arbitration in cases of impasse.

The second section of this article gives an overview of protection of computer software by patents, copyrights and trade secret law. The third section discusses the significant gap in protection of software between patents and copyrights. It then discusses how trade secret law, albeit imperfectly, fills that gap. The fourth section discusses the traditional requirements for trade secret protection, their applicability to computer software and their inappropriateness to the software business as currently conducted.

The final section proposes legislative solutions to the problem of a legal system that seems not to fit the needs of the software industry.

Two trends, however, may change this sorry state of affairs. First, American business is focusing increasing attention on industrial design. Manufacturers are realizing that good industrial design is an important ingredient in their products' success and a vital factor in industrial competitiveness in both domestic and international markets. Second, steady expansion of the scope of trademark protection under the federal trademark statute has pushed into the realm of industrial design. Federal judicial decisions now provide substantial protection of product designs and packaging, and these decisions are part of the mainstream of American trademark law. As awareness of the importance of industrial design spreads, this trend is likely to continue.

The stage is thus set for protecting industrial designs under trademark law. Ultimately, Congress may adopt a system of registration under copyright principles, as designers have been requesting for so long. However, the 100th Congress's response to the bills for this purpose can best be described as desultory. More important, theory and policy suggest that copyright principles may not provide the best legislative paradigm for protecting industrial designs, while trademark principles may be more appropriate for the task. If this view is correct, Congress may never adopt the legislation so long sought by American designers, and trademark law, by default, may continue to be their best refuge.

This article attempts both to make the case for trademark protection of industrial designs and to analyze how that protection should work in practice. Part II reviews the well-known inadequacies of patent law and the way the current copyright statute generally excludes protection for industrial designs. It then outlines some necessary fundamentals of trademark law and suggests that protecting industrial designs under copyright principles might have serious deficiencies in theory and policy, while protection under trademark principles might be more appropriate.

Part III reviews the Sears/Compco decisions, in which the Supreme Court ruled that federal patent law preempts state trademark protection as applied to industrial designs, and describes how the development of federal trademark law and its application to industrial designs has bypassed those decisions. Part III next suggests that the pro-competitive policy underlying Sears/Compco should apply also to federal trademark doctrine as a matter of statutory interpretation, even though the decisions themselves do not govern federal trademark law. After analyzing the tension between patent and trademark protection of industrial designs, however, Part III concludes that patent policy does not require denying protection to industrial designs in general. Instead, it shows how courts adjudicating trademark infringement disputes may reconcile trademark protection for unpatented industrial designs with patent policy by applying trademark doctrine with an eye to that policy and carefully calibrating trademark remedies.

Assuming, then, that neither patent policy nor statutory interpretation precludes trademark protection for industrial designs, Part IV discusses how trademark protection should work in practice. Part IV(A) considers the doctrine of functionality and its problematic cousin, aesthetic functionality. It argues that the cousin should be disowned and that courts should limit the doctrine of functionality to its pristine role-dividing the realm of ornament from the realm of utilitarian function-as several courts have ruled. It then discusses how the doctrine of functionality applies to industrial designs, which invariably blend form and function.

Part IV(B) recommends a way to fill the gap left in legal theory by abandoning the doctrine of aesthetic functionality. It proposes that a well-known feature of trademark law, the doctrine of distinctiveness, fill this gap, and it describes how courts may apply the distinctiveness spectrum to industrial designs. Next, Part IV(C) discusses the difficult question whether trademark law may protect aspects of industrial designs that make one product compatible with another. Finally, Part IV(D) explores two practical issues that may arise in trademark protection for industrial designs: the use of disclaimers and the question of buyer sophistication.

Section III analyzes the impact of the Supreme Court's opinions in Sony and Nation Enterprises on the fair use doctrine. Section IV attempts to put some of the Court's more sweeping statements in these opinions in proper statutory perspective, particularly certain ‘presumptions' developed by the Court. Section V then proposes a coherent framework for fair use analysis based on the purpose, intent, and logic of each of the four statutory factors and their treatment in decisions of the lower courts. It continues by examining two nonstatutory factors that the courts have identified, and it ends with a reevaluation of the Sony and Nation Enterprises decisions. Finally, Section VI concludes by offering a prognosis for the future of fair use.

Partly as a result of these developments, trade dress litigation, which includes litigation over product configurations, has burgeoned in recent years. Some jurists see this sort of litigation as a natural development of the law of trade symbols in federal fora, providing valuable and sometimes necessary protection for the legitimate identifiers of a product's source. Others see it as a dangerous development in intellectual property law, undermining the integrity of the patent system by providing patent-like protection on the cheap. In short, the flowering of litigation that appears to some courts like a robust garden appears to others like a plague of weeds.

The dispute is not confined to matters of general policy. It infects virtually every element of trade dress doctrine. Indeed, with respect to trade dress protection for product configurations, the federal circuits are not so much split as splintered. They disagree on the standard for determining whether product features are inherently distinctive, thereby enjoying protection without a demonstration of secondary meaning. They disagree on the standard for determining which product features are functional and consequently not entitled to protection in the absence of a patent. Finally, they disagree on the process for determining whether a likelihood of confusion between the plaintiff's and defendant's trade dress exists, and even whether the same standard for likelihood of confusion should apply to product configuration cases as to other cases of unfair competition. In short, the federal courts in this field disagree on virtually every aspect of legal doctrine on which it is possible to disagree. This article is an attempt to light a candle in the darkness. It focuses on two aspects of the puzzle that, in my view, have failed to receive sufficient emphasis. The first is the unique set of purposes served by the law of trade symbols, which is both broader than and different from the purposes of patent law. Proper appreciation of the differences and their consequences may help to avoid an exaggerated perception of a conflict between the two fields of law.

The second aspect of the puzzle that may deserve more attention is the question of remedies. Patent remedies are clearly defined. If there is infringement, an injunction usually will issue, and the defendant's commerce in the infringing products will be halted. Trade symbol remedies, however, are more subtle and flexible. Injunctive relief is standard, but it should and does have infinite gradations. It covers the gamut from plenary injunctions precluding the marketing of specified products in specified dress, to orders requiring the minutest changes in labeling or packaging. Exploiting this vital difference between the two fields of law is perhaps the principal means by which courts can avoid conflicts between them.

In elucidating these points, this article begins by discussing the purposes of trade symbol law, how they differ from those of patent protection, and how a conflict in policy may arise. It then analyzes the applicability of the Supreme Court's trilogy of pre-emption decisions to federal trade dress protection under the Lanham Act, including constitutional issues. Finding nothing determinative in those decisions, it next turns to the three elements of trade dress protection: (1) distinctiveness, (2) nonfunctionality, and (3) likelihood of confusion, with emphasis on trade dress and product configurations.

In discussing functionality, this article analyzes the potential for conflict with patent law in the the style of another noted preemption decision, Kewanee Oil Co. v. Bicron Corp. There the Supreme Court upheld state trade secret law against a challenge based upon federal patent policy; this article follows the Kewanee Court's lead in addressing the impact of in-force and expired patents, as well as patentability, on trade dress protection for product configurations. Finally, this article examines remedies for infringing trade dress in product configurations and shows how properly tailored relief can both advance the purposes of trade symbol protection and avoid conflict with patent policy, even in the hardest cases. In the process, this article reveals how remedial aspects of trade dress protection, which are often neglected in analyzing issues of liability, are intimately related both to the substantive doctrines of trade dress protection and to the policies that it serves.

Accordingly, this article addresses the current explosion in patent coverage from an economic and practical perspective. It seeks sound economic principles, based upon the notion of entrepreneurial risk, to explain how the patent-law exception to the general prohibition on monopolies should be construed and to determine whether the exception, as properly extrapolated to modern science and technology, ought to encompass computer programs and business methods. Part I examines the nature of the balance between prohibited monopoly and the protection of intellectual property and concludes that the balance between rule (monopoly is bad) and exception (temporary patent protection may be good) depends on the concept of technological risk, as distinguished from market risk. Part II examines computer programs, compares them to other modern innovations, as well as to the building of skyscrapers and bridges, and concludes that computer program development does not involve the same level of technological risk as do other industries now supported by patent protection. Part III examines business methods and concludes that, in general, their exploitation entails only market risk--a risk ordinarily left to free competition in the marketplace, not avoided by monopoly. Part IV explores how two interacting trends in the Federal Circuit--the “suggestion” test for nonobviousness and the court's reluctance to exercise judgment in determining patentable subject matter-- exacerbate the problem of distinguishing innovations that need and deserve temporary monopoly for their creation from those that do not. Part V concludes with some observations about the results of current trends if continued.

In this talk, I'm going to exercise both of these prerogatives. I've been thinking about the big picture in patents for over a quarter century, and I'm more worried than I've ever been.

Let me begin by making my usual (and truthful) disclaimer. I'm not one of those academics who delights in being a gadfly and finding cause for alarm in every new law and every twist and turn of legal history. I'm the author of three treatises--on intellectual property generally, licensing, and cyberlaw. I've spent much of the last thirteen years of my life writing and revising them. Like treatises generally, each largely describes and explains our current intellectual property system, and each finds much to like in what both recent and earlier history have wrought. More fundamentally, I strongly subscribe to the view that the robust intellectual property system of Anglo-American society is in part responsible for our society's extraordinary economic success over the last four centuries.

But the warning signs of excess are everywhere. One need look no farther than the Federal Trade Commission's White Paper that is the subject of today's discussion. Think about it. Congress has clipped the FTC's policy wings so often that it's a wonder the agency can fly at all. Moreover, for the first time in decades, the executive and legislative branches of our government are controlled by Republicans, who have not generally been zealous advocates for aggressive antitrust enforcement and “pruning” the IP laws. Yet even in this very conservative political environment, the FTC--a much-chastened agency--has proposed ten recommendations (fourteen, if you count the subheads) for reining in the patent system. If that isn't a clear sign that something desperately needs attention, I don't know what is.

Therefore I'm going to take the premise of my talk--that something is wrong-- for granted. In the short time that I have, I'd like to explore three further questions. First, what is wrong? Second, how can we fix it? And third, how important is it that we do so?