A Simple Conveyance Rule for Complex Innovation

Tulsa Law Review Volume 44 Issue 4 The Scholarship of Richard A. Epstein Article 3 Summer 2009 A Simple Conveyance Rule for Complex Innovation Adam Mossoff Follow this and additional works at: https://digitalcommons.law.utulsa.edu/tlr Part of the Law Commons Recommended Citation Adam Mossoff, A Simple Conveyance Rule for Complex Innovation, 44 Tulsa L. Rev. 707 (2013). Available at: https://digitalcommons.law.utulsa.edu/tlr/vol44/iss4/3 This Legal Scholarship Symposia Articles is brought to you for free and open access by TU Law Digital Commons. It has been accepted for inclusion in Tulsa Law Review by an authorized editor of TU Law Digital Commons. For more information, please contact . Mossoff: A Simple Conveyance Rule for Complex Innovation A SIMPLE CONVEYANCE RULE FOR COMPLEX INNOVATION Adam Mossoff I. INTRODUCTION .................................................................................................... 707 II. A SIMPLE DEFAULT RULE FOR PATENT CONVEYANCES ...................................... A. B. 711 The Conveyance Default Rule in Nineteenth-Century Patent Doctrine ...... 712 The Confusion among Modem Courts and Commentators Concerning 717 the Foundations of Exhaustion Doctrine ..................................................... III. ANTITRUST AS A COMPLICATING FACTOR IN A SECOND-BEST WORLD ............... 720 A. The Effect of Intermingling Conveyance Rules and Antitrust Standards ...... 721 726 B . Antitrust and Innovation ................................................................................. IV . 736 CON CLU SION .......................................................................... I. INTRODUCTION Richard Epstein's work in intellectual property reflects his long-held belief in the importance of crafting "a sound system of legal rules" on the basis of a utilitarian calculus that seeks "the maximization of social utility." 1 His refrain is consistent and clear: intellectual property rights are born of the same functionalist policy concerns as traditional property rights in land and chattels. As he has remarked, "a unified set of principles apply to both physical and intangible property," because both types of in securing to owners the "exclusive rights of property share a "common aspiration" 2 disposition." and use possession, In this article for the Eighth Annual Legal Scholarship Symposium celebrating the work of Richard Epstein, I want to explore one aspect of Epstein's utilitarian defense of intellectual property rights: courts should secure to patentees their exclusive rights of use and disposition by applying to patent conveyances the same default rule used in real * Associate Professor of Law, George Mason University School of Law; J.D., University of Chicago; M.A., Columbia University; B.A., University of Michigan. Thank you to the Tulsa Law Review for hosting this symposium celebrating the work of my teacher, mentor and friend, Richard Epstein. I also wish to thank Bruce Johnson, Bruce Kobayashi, Timothy Muris, Henry Smith and Joshua Wright, and the participants in a Robert A. Levy Fellows Workshop in Law & Liberty at George Mason University School of Law, for their invaluable comments. 1. Richard A. Epstein, Simple Rulesfor a Complex World 30 (Harv. U. Press 1995). 2. Richard A. Epstein, The DisintegrationoflintellectualProperty,62 Stan. L. Rev. - (forthcoming 2010) (ms. at 5-6, available at http://ssm.com/abstract'1236273). Published by TU Law Digital Commons, 2008 1 Tulsa Law Review, Vol. 44 [2008], Iss. 4, Art. 3 TULSA LA W REVIEW [Vol. 44:707 property conveyances. Accordingly, Epstein maintains that courts should enforce the rights of patentees to convey lesser interests in their property, such as the right to manufacture or sell a patented invention only within a designated territory, when these restrictions are expressly provided in conveyance instruments and the relevant downstream parties have notice of them. In the absence of express terms providing reasonable notice of restrictions, courts should follow the same approach they have adopted in real property: in an unconditional conveyance, a patentee alienates all of its interests and thus exhausts any property claims against subsequent downstream users. Such doctrines in real property have long provided stable legal mechanisms for landowners to engage in price discrimination and in other use-restricting strategies to maximize the commercial value in their property, and the same conveyance default rule in patent law would achieve similar efficiencies. It is my purpose to assess whether Epstein's endorsement of this property-based conveyance rule for patents makes sense within the patent system. Given some unfortunate misunderstandings about Epstein's views on intellectual property, though, it is necessary to note at the outset that he has eschewed a formalistic application of real property doctrines to the realm of inventions. Although some critics have accused him of being "dogmatic" and "simplistic" in linking tangible property and intellectual property, 3 his work highlights what he considers to be the "plausible but not infallible assumptions" that underlie intellectual property entitlements. 4 He believes that intellectual property rights, like all legal doctrines, reveal that "everything is a matter of delicate tradeoff and accommodation," 5 and he has explained in great detail how the "basic trade-off between administrative costs and improved incentives for private behavior is always with us." 6 Even for someone who does not share his commitment to utilitarianism or agree with all of his prescriptions, there is much to appreciate in his [us] to the multiple scholarly work on intellectual property, as he has sought to "sensitize 7 issues of system design that arise with all forms of property." 3. See Peter S. Menell, The Property Rights Movement's Embrace of Intellectual Property: True Love or Doomed Relationship?, 34 Ecol. L.Q. 713, 717, 753-54 (2007); cf Eric R. Claeys, Takings: An Appreciated Retrospective, 15 Win. & Mary Bill Rights J. 439, 439-40 (2006) (surveying similar criticisms of Epstein's earlier property scholarship). 4. Richard A. Epstein, Liberty vs. Property?Cracks in the Foundationsof CopyrightLaw, 42 S.D. L. Rev. 1,4 (2005). 5. Richard A. Epstein, Intellectual Property: Old Boundaries and New Frontiers, 76 Ind. L.J. 803, 806 (2001). 6. Epstein, supran. 1, at 34. On the basis of his utilitarian metric, Epstein has described at length how the analysis of systemic costs and benefits both justifies and limits the scope of protections afforded to intellectual property. Belying claims that Epstein is dogmatically treating intellectual property as real property, he has described the rough, second-best justification for the durational term limits in copyrights and patents, as opposed to the unlimited duration in fee simples. See Epstein, supra n. 5, at 821-27. He also was an early critic of extending patent protection to DNA. (...truncated)