Patent infringement as nuisance

Catholic University Law Review

Volumn 59, Issue 1, 2009, Pages 61-124

  Newman, Christopher M ^a  

^a GEORGE MASON UNIVERSITY   (United States)

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EID: 77749270642     PISSN: 00088390     EISSN: None     Source Type: Journal    
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References (306)

1. See generally Lloyd Cohen, Holdouts and Free Riders, 20 J. LEGAL STUD. 351 (1991) (discussing difficulties common to negotiations that often result in the failure of parties to reach an agreement).
2. Brief for 52 Intellectual Property Professors as Amici Curiae in Support of Petitioners, eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006) (No. 05-130), 2006 WL 1785363 (arguing that such a settlement amounts to "holdup money" that is "not a legitimate part of the value of a patent," but is instead, "a windfall to the patent owner").
3. See Mark A. Lemley & Carl Shapiro, Patent Holdup and Royalty Stacking, 85 TEX. L. REV. 1991, 1993 (2007) ("Such royalty overcharges act as a tax on new products incorporating the patented technology, thereby impeding rather than promoting innovation.").
4. See, e.g., MercExchange, L.L.C. v. eBay, Inc., 401 F.3d 1323, 1338 (Fed. Cir. 2005) ("[CJourts have in rare instances exercised their discretion to deny injunctive relief in order to protect the public interest." (quoting Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1547 (Fed. Cir. 1995) (internal quotation marks omitted))), vacated, 547 U.S. 388 (2006).
5. MercExchange, 401 F.3d at 1338 (quoting Richardson v. Suzuki Motor Co., 868 F.2d 1226, 1247 (Fed. Cir. 1989));
6. see, e.g., Connell v. Sears, Roebuck & Co., 722 F.2d 1542, 1548 (Fed. Cir. 1983) ("[A] patent is a form of property right, and the right to exclude recognized in a patent is but the essence of the concept of property.");
7. Schenck v. Nortron Corp., 713 F.2d 782, 786 n.3 (Fed. Cir. 1983) ("The patent right is but the right to exclude others, the very definition of 'property.'").
8. MercExchange, 401 F.3d at 1338 (articulating the "general rule . . . that a permanent injunction will issue once infringement and validity have been adjudged").
9. cBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388, 392 (2006).
10. Id. at 391. Several property scholars have begun to point out that this seeming anomaly of a "right to exclude" that is not necessarily enforced as such may simply stem from a fundamental error that was made by the realists in focusing on exclusion as the essence of property. In this view, the pre-realist natural and common law tradition is better read to assign property owners "a right to determine exclusively how a thing may be used."
11. Eric R. Claeys, Property 101: Is Property a Thing or a Bundle?, 32 SEATTLE U. L. REV. 617, 631 (2009);
12. see also Larissa Katz, Exclusion and Exclusivity in Property Law, 58 U. TORONTO L.J. 275, 275 (2008) (arguing that the "central concern" of the structure of property ownership "is not the exclusion of all non-owners from the owned thing but, rather, the preservation of the owner's position as the exclusive agenda setter for the owned thing");
13. Adam Mossoff, Exclusion and Exclusive Use in Patent Law, 22 HARV. J.L. & TECH. 321, 323 (2009) (criticizing the "exclusion concept of patents" in patent law). As will be discussed infra at notes 69-83 and accompanying text, the work of Henry Smith can be read as partially reconciling these two lines of thought, justifying the enforcement of a "right to exclude" in economic terms as the most efficient means of allocating the right to determine use.
14. See eBay, 547 U.S. at 391-93 ("[A] plaintiff seeking a permanent injunction must satisfy a four-factor test before a court may grant such relief.").
15. See, e.g, Lemley & Shapiro, supra note 3, at 2035-44 (proposing a model for patent reform that withholds injunctive relief under some circumstances);
16. see also Vincenzo Denicolò et al., Revisiting Injunctive Relief: Interpreting eBay in High-Tech Industries with Non-Practicing Patent Holders, 4 J. COMPETITION L. & ECON. 571, 590-91 (2008) (arguing that courts should not withhold injunctive relief where manufacturer failed to exhibit due diligence in searching for IP rights or where redesign was impossible ex ante);
17. John M. Golden, Commentary, "Patent Trolls" and Patent Remedies, 85 TEX. L. REV. 2111, 2147-48 (2007) (critiquing as overly broad Lemley and Shapiro's model predicting " overcompensation" of patent owners resulting from the presumptive availability of injunctive relief);
18. Mark A. Lemley & Philip J. Weiser, Should Property or Liability Rules Govern Information?, 85 TEX. L. REV 783, 784-85 (2007) ("[T]here are a number of cases arising under patent law that should not qualify for injunctive relief, including possibly the eBay case itself....").
19. eBay, 547 U.S. at 393.
20. See id. (declining to adopt a categorical rule premised on a four-factor test).
21. See infra Part II (discussing the inefficiency and distributive injustice of holdout power in the context of property).
22. See supra note 5 and accompanying text.
23. See infra Part V.B (examining infringement in comparison to trespass and encroachment in comparison to nuisance);
24. see also Archer v. Greenville Sand & Gravel Co., 233 U.S. 60, 64-65 (1914) (granting injunction as relief for trespass); Urban Site Venture II L.P. v. Levering Assoes., 665 A.2d 1062 (Md. 1995) (granting injunction as relief for encroachment);
25. RICHARD R. POWELL, POWELL ON REAL PROPERTY § 68.09 (Michael Allan Wolf ed., 2009) (discussing injunctions as proper equitable relief for a finding of encroachment).
26. See discussion infra Parts IV.B, V.B.
27. By "ex ante," I mean efforts that occur prior to making the irreversible investments that render one susceptible to holdout.
28. See Richard A. Epstein, A Clear View of The Cathedral: The Dominance of Property Rules, 106 YALE L.J. 2091, 2092-96 (1997) [hereinafter Epstein, A Clear View];
29. Henry E. Smith, Property and Property Rules, 79 N.Y.U. L. REV. 1719, 1731 (2004) [hereinafter Smith, Property Rules].
30. See Smith, Property Rules, supra note 18, at 1728.
31. The terms "property rule" and "liability rule" stem from Guido Calabresi & A. Douglas Melamed. Guido Calabresi & A. Douglas Melamed, Property Rules, Liability Rules, and Inalienability: One View of the Cathedral, 85 HARV. L. REV. 1089, 1092-93 (1972).
32. See Smith, Property Rules, supra note 18, at 1728.
33. See sources cited supra note 15 and accompanying text.
34. See infra Part IV.B.
35. See, e.g., Wetherbee v. Green, 22 Mich. 311, 312-16 (1871) (finding that good-faith improvers who make vast improvements to a chattel may retain title).
36. Id.
37. See infra Part V.A (articulating the "significant-harm rule").
38. See RESTATEMENT (SECOND) OF TORTS §§822-831 (1977) (outlining the various factors needed to determine an injunction for nuisance);
39. see also Madison v. Ducktown Sulphur, Copper & Iron Co., 83 S.W. 658, 667 (Tenn. 1904) (refusing to grant an injunction because of various factors, including the value of the activity creating the nuisance).
40. See Epstein, A Clear View, supra note 18, at 2102.
41. See Henry E. Smith, Intellectual Property as Property: Delineating Entitlements in Information, 116 YALE L.J. 1742, 1748-49 (2007) [hereinafter Smith, Intellectual Property] (discussing the ability of property rules to reduce information costs by promoting modularity, and arguing that this renders exclusion strategies equally advantageous for intellectual and tangible property).
42. See id. at 1795 (asserting that the costs of solidifying an idea protected by IP principles are not "fundamentally different" than the costs of constructing tangible property).
43. See generally United States v. Blackman, 613 S.E.2d 442, 445-46 (Va. 2005) (defining negative easements as those that "convey rights to demand that the owner of the servient tract refrain from certain otherwise permissible uses of his own land" and easements in gross as those benefitting individual persons as opposed to those running with tracts of land (citations omitted)).
44. See Smith, Property Rules, supra note 18, at 1728.
45. Parallel arguments can be made with respect to copyright law, but there are significant differences between patent law and copyright law that require separate discussion. This Article constructs a general argument and applies it to patent law, leaving the discussion of copyright law for a future project.
46. See, e.g., Wetherbee v. Green, 22 Mich. 311, 320 (1871) (mandating that a comparison in value be considered in deciding cases of accession).
47. See generally Smith, Property Rules, supra note 18, at 1764-68 (discussing governance and exclusion regimes).
48. See Epstein, A Clear View, supra note 18, at 2094.
49. See text accompanying notes 1-3.
50. See Epstein, A Clear View, supra note 18, at 2094.
51. Id.
52. Id. In Epstein's example, the potential social surplus from trade is "equal to 1000 minus 10, or 990."
53. Id. If the parties ultimately agree on a price of 400, A realizes a gain of 390, and B realizes a gain of 600. If, however, A and B spent 300 and 400 respectively in order to reach this agreement, the total surplus has been reduced to 290.
54. See, e.g., A. MITCHELL POLINSKY, AN INTRODUCTION TO LAW AND ECONOMICS 10 (1983) (referring to this assumption as the "assumption of consumer sovereignty");
55. UDWIG VON MISES, EPISTEMOLOGICAL PROBLEMS OF ECONOMICS 178 (George Reisman trans., Ludwig von Mises Inst. 3d ed. 2003) (1933) ("[T]he ultimate relevant cause of the exchange ratios of the market is the fact that the individual, in the act of exchange, prefers a definite quantity of good A to a definite quantity of good B. The reasons he may have for acting exactly thus and not otherwise ⋯ are of absolutely no importance for the determination of a market price.")
56. See, e.g., Calabresi & Melamed, supra note 20, at 1106-07 (discussing holdout in terms of a divergence between "the price demanded" and "the value which the sellers in actuality attach").
57. It may also be based on A's assessment of the subjective utility he will gain from future uses of the resource, in which case the scenario is just another variety of idiosyncratic holdout.
58. See supra notes 41-42 and accompanying text (discussing Epstein's model of a type of holdout power that gives rise to strategic bargaining and is often considered conducive to market failure).
59. In other words, in a market economy selling something is one of the most important things you can do with a resource.
60. For example, suppose the highest valued use to which A can put the resource is worth 10, while B's investment would give the resource a value of 1000. Reallocating the resource to B would thus result in a social surplus of 990. If A manages to negotiate a selling price of 800, and each party incurs 50 in transaction costs, we are left with a social surplus of 890, of which 750 is going to A and 140 is going to B.
61. James E. Krier & Stewart J. Schwab, Property Rules and Liability Rules: The Cathedral in Another Light, 70 N.Y.U. L. REV. 440, 466 (1995) (criticizing the belief that liability rules are better than property rules in situations of high transaction costs).
62. See supra note 43 and accompanying text.
63. See, e.g., Posting of Lawrence Solum to Legal Theory Lexicon, http://lsolum.typepad. com/legal-theory-lexicon/2005/07/legal-theory-le.html (July 10, 2005).
64. The classic source is, of course, Locke's justification of private property on the ground that ownership arises when someone "hath mixed his [1]abour with, and joyned to it something that is his own, and thereby makes it his [pjroperty. It being by him removed from the common state [n]ature placed it in, it hath by this [1]abour something annexed to it, that exludes the common right of other [m]en." JOHN LOCKE, TWO TREATISES OF GOVERNMENT 288 (Peter Lasiert ed., Cambridge Univ. Press 1988) (1690). It ought to, but unfortunately does not, go without saying that when Locke says "labour" in this context he means productive labor-that is, labor that actually renders the common property more capable of satisfying human wants than it was before.
65. See Adam Mossoff, Locke's Labor Lost, 9 U. CHI. L. SCH. ROUNDTABLE 155, 15861 (2002) (responding to various philosophers who have dismissed Lockean property theory as incoherent or absurd based on their own incoherent or absurd notions as to what qualifies as "labor").
66. See, e.g., Wendy J. Gordon, On Owning Information: Intellectual Property and the Restitutionary Impulse, 78 VA. L. REV. 149, 277-78 (1992) (discussing a trend in intellectual property law to treat all appropriations of value created by another as actionable). Gordon notes that judges may feel no need to examine the trend because the restitutionary notion that one deserves to keep the "fruits of his labor" seems so evidently correct, so evidently in accord with traditional notions of corrective justice and traditional conceptions of the judicial role, that giving legal protection to intellectual products appears to require no special justification.
67. Id.
68. See, e.g., Robert D. Cooter, The Best Right Laws: Value Foundations of the Economic Analysis of Law, 64 NOTRE DAME L. REV. 817, 818 (1989) ("A clean answer to the 'paradox of value' is that, while water is more useful and its total utility exceeds diamonds', the relative scarcity of diamonds makes their marginal utility exceed water's.").
69. Any complete theory of distributive justice along these lines must decide whether and how to distinguish between actions that produce value intentionally (that is, where the increased ability to satisfy human wants is of the type and magnitude that the actor intended to achieve) and actions that do so unintentionally (that is, where unforeseen circumstances render the results of one's efforts valuable in a way-or to a degree-that one did not intend).
70. See supra Part II.A.
71. See supra Part II.B.
72. See Calabresi & Melamed, supra note 20, at 1105-10. In Calabresi and Melamed's. terminology, an entitlement protected by injunction is subject to a "property rule," which means that taking it without the owner's consent subjects one to severe sanctions designed to be prohibitive.
73. Id. at 1106. When an entitlement is protected by a "liability rule" on the other hand, taking it without the owner's consent only renders one liable to pay damages to the owner in an amount determined by reference to some collectively determined criteria.
74. Id. at 1107.
75. See Lemley & Weiser, supra note 10, at 788. Specifically, the objection is not just that courts will not identify damages accurately but that the deviation will be systematic in one direction. As Richard Epstein puts it, the argument is that "[t]he risk of undercompensation in such situations is pervasive," thereby undermining investment incentives.
76. As a shorthand, we call this "Epstein's Law." Id. at 787-88 (quoting Epstein, A Clear View, supra note 18, at 2093).
77. See Calabresi & Melamed, supra note 20, at 1125 ("Liability rules represent only an approximation of the value of the object to its original owner and willingness to pay such an approximate value is no indication that it is worth more to the thief than to the owner.").
78. See supra pp. 71-72 (describing a holdout scenario in which the property seller values his property higher than market value to account for subjective factors).
79. See Epstein, A Clear View, supra note 18, at 2093. It is not actually impossible, in principle, for a takings system to attempt to provide compensation for consequential damages the same way a tort system does; however, such is not the normal practice.
80. See, e.g., RICHARD A. EPSTEIN, TAKINGS: PRIVATE PROPERTY AND THE POWER OF EMINENT DOMAIN 51-56, 80-86 (1985) (exploring theories of providing compensation for consequential damages and takings of goodwill).
81. See Epstein, A Clear View, supra note 18, at 2099 (observing that the common contracts principle known as the "perfect-tender rule" is premised on the notion that a merchant is expected to deliver goods, not the value of diose goods in expectation damages).
82. Id.
83. See id. at 2093 ("Over time, the inefficiencies of a liability system cascade until the security of possession and the security of exchange needed for complex commercial life and a satisfying personal one are no longer available.").
84. See id.;
85. Lemley & Weiser, supra note 10, at 788 ("Epstein's Law holds that would-be purchasers of a property right invariably prefer liability rules and use them as an opportunity for government rent-seeking.").
86. See Smith, Property Rules, supra note 18, at 1764-68 (examining the "[mjanipulation and the [d]eterioration of [1]iability [s]ignals").
87. Id. at 1753-54.
88. Id.
89. Id. at 1755.
90. Id. at 1755-56.
91. Id. at 1755.
92. Id.
93. Id.
94. See id. at 1755-56.
95. By uncertainty, we do not simply mean risk; rather, we mean risk that cannot be expressed as an actuarial probability. As Smith observes, entrepreneurs profit from the opportunities afforded by uncertainty; if everyone shared identical information about risk, entrepreneurial profit would vanish. Id. at 1725;
96. see also LUDWIG VON MISES, HUMAN ACTION: A TREATISE ON ECONOMICS 293 (Henry Regnery Co. 3d rev. ed. 1966) (1949) ("If all entrepreneurs were to anticipate correctly the future state of the market, there would be neither profits nor losses.").
97. Smith, Property Rules, supra note 18, at 1725.
98. Id. at 1763-64.
99. Id.
100. Wat 1763.
101. Id. at 1764.
102. Id.
103. Id.
104. Id. at 1765.
105. Id. at 1745-46.
106. See also id. at 1765.
107. See, e.g., id. at 1768;
108. see also ReMine ex rel. Liley v. Dist. Court of Denver, 709 P.2d 1379, 1382 (Colo. 1985).
109. See Smith, Property Rules, supra note 18, at 1768;
110. see also Thomas W. Merrill & Henry E. Smith, Optimal Standardization in the Law of Property: The Numerus Clausus Principle, 110 YALE L.J. 1, 23-24 (2000) (exploring the numerus clausus principle and noting that it "presents the picture of a fixed menu of options from which deviation will not be permitted").
111. On the other hand, the costs of actually enforcing an injunction may outweigh those of enforcing a damages award, as the former requires officials to bring about specific actions pertaining to unique objects, while the latter may be levied against any available property belonging to the defendant.
112. See, e.g., Boomer v. Atl. Cement Co., 257 N.E.2d 870, 873 & n.ast; (N.Y. 1970) (denying an injunction that would have shut down a cement plant while noting that the defendant's investment in the plant was "in excess of $45, 000,000").
113. See Richard A. Epstein, Holdouts, Externalities, and the Single Owner: One More Salute to Ronald Coase, 36 J.L. & ECON. 553, 556-57 (1993) (advocating the "single owner" device as a useful framework for determining the most beneficial joint output).
114. See Smith, Property Rules, supra note 18, at 1753-54 (discussing the advantages of low-cost proxy signals inherent in an exclusion strategy system).
115. See F.A. Hayek, The Use of Knowledge in Society, 35 AM. ECON. REV. 519, 526 (1945).
116. See, e.g., Epstein, A Clear View, supra note 18, at 2092-93 (discussing the use of property rules and the limited applicability of takings under legal supervision).
117. But see Kelo v. City of New London, 545 U.S. 469 (2005) (upholding the constitutionality of using eminent domain to transfer land from one private owner to another in order to further economic development).
118. See Wetherbee v. Green, 22 Mich. 311, 313-314 (1871).
119. See id. at 320 (refusing to allow plaintiff landowner to recover hoops created by a goodfaith improver from timber cut on plaintiffs land). Although this doctrine had traditionally been conceived in terms of whether the original property still existed in specie, Justice Cooley recognized that for purposes of equity, the key issue was the relative contributions of the improver's labor and the original resource to the value of the new asset: No test which satisfies the reason of the law can be applied in the adjustment of questions of title to chattels by accession, unless it keeps in view the circumstance of relative values. When we bear in mind the fact that what the law aims at is the accomplishment of substantial equity, we shall readily perceive that the fact of the value of the materials having been increased a hundred-fold, is of more importance in the adjustment than any chemical change or mechanical transformation, which, however radical, neither is expensive to the party making it, nor adds materially to the value. There may be complete changes with so little improvement in value, that there could be no hardship in giving the owner of the original materials the improved article; but in the present case, where the defendant's labor-if he shall succeed in sustaining his offer of testimony-will appear to have given the timber in its present condition nearly all its value, all the grounds of equity exist which influence the courts in recognizing a change of title under any circumstances. Id. at 320-21 (articulating Justice Cooley's comparative value theory);
120. see also Earl C. Arnold, The Law of Accession of Personal Property, 22 COLUM. L. REV. 103, 103-07 (1922) (discussing the Wetherbee decision to award the defendant the improved property).
121. BLACK'S LAW DICTIONARY 17 (9th ed. 2009) (defining accession).
122. See Thomas W. Merrill, Accession and Original Ownership, 1 J. LEGAL ANALYSIS 459, 463 (2009).
123. See id. at 464-67.
124. Merrill recognizes that Lockean labor theory can be seen as based on an accession theory, though he later characterizes Locke as "unabashedly ground[ing] original ownership of property in first possession-" Id. at 465, 497. While elements of both theories are present, I believe the former characterization to be the better reading of Locke's position given his emphasis on the disproportionate extent to which the value of a resource to human beings arises because of the labor invested in it.
125. In Merrill's framework, this conflict between "exclusion" and "accession" would be described not as a conflict over whether to apply an accession rule, but as one over which accession rule to apply-that is, a conflict over which resource should be regarded as having the most prominent relationship to the new value: the tangible property taken without permission or the productive investments of the improver.
126. See Smith, Property Rules, supra note 18, at 1742-43.
127. Wetherbee v. Green, 22 Mich. 311, 313 (1871).
128. Id. (finding that to award all of the value of the improved good to the original owner "is so opposed to all legal idea of justice and right and to the rules which regulate the recovery of damages generally, that if permitted by the law at all, it must stand out as an anomaly and must rest upon peculiar reasons");
129. see also Arnold, supra note 95, at 106 (showing that even before Cooley's articulation of the comparative value theory, courts recognized an exception to the owner's claim in '"cases in which the accession of value to the raw material is so far beyond the original value, as to impress on the reason of mankind, the injustice of permitting the bona fide producer of that increased value, to be deprived of it'" (quoting Lampton's Ex'rs v. Preston's Ex'rs, 24 Ky. (1 J.J. Marsh.) 454, 461 (1829)).
130. See Kelvin H. Dickinson, Mistaken Improvers of Real Estate, 64 N.C. L. REV. 37, 38-39 (1985);
131. John Henry Merryman, Improving the Lot of the Trespassing Improver, 11 STAN. L. REV. 456, 465 (1959).
132. See L.C. Warden, Mandatory Injunction to Compel Removal of Encroachments by Adjoining Landowner, 28 A.L.R. 2D 679, 686-91 (1953) (collecting cases).
133. Proctor v. Huntington, 192 P.3d 958, 964 (Wash. Ct. App. 2008) (footnote omitted) (citations omitted).
134. Wetherbee, 22 Mich, at 319-20.
135. Law and economics analysis would have us believe there is no real difference between the two scenarios-Coase tells us that if the improvement is efficient and transaction costs are low, the injunction will result not in actual destruction but in a transfer payment. Such reasoning, however, is fundamentally at odds with the traditions governing equitable injunctions. These extraordinary interventions are intended to prevent or rectify harms that no lucre can salve; to seek one merely as a bargaining chip is to belie the necessary avowal that money damages are inadequate. Thus, courts of equity tend to assume that an injunction will be enforced if granted, and ask whether this result would be "oppressive," using some analysis similar to the one stated by the court in Proctor.
136. Cf. Arnold, supra note 95, at 106 (discussing the "injustice of permitting the bona fide producer of... increased value, to be deprived of it").
137. See Wetherbee, 22 Mich, at 313 ("Where vicious motive or reckless disregard of right are not involved, to inflict upon a person who has taken the property of another ... is so opposed to all legal idea of justice and right. . . .");
138. Arnold, supra note 95, at 108;
139. Warden, supra note 105, at 705-09 (collecting cases illustrating the proposition that "[w]here an encroachment... is intentional or wilful, a mandatory injunction will ordinarily be granted to compel its removal, without regard for the relative conveniences or hardships which may result").
140. See Wetherbee, 22 Mich, at 311-12.
141. See id. at 312.
142. See id.
143. See id. at 320.
144. This way of modeling the problem is inspired by Stewart E. Sterk, although he does not purport to define good faith in this manner. Steward E. Sterk, Property Rules, Liability Rules, and Uncertainty About Property Rights, 106 MICH. L. REV. 1285, 1302-05 (2008). In fact, Sterk's analysis shows the range of inefficient searches to be much broader than those for which S < pH, because one must consider not only the harm to the putative owner but the cost to the would-be improver of abstaining from use (A). Only where this avoidance cost is less than H but greater than pH would certainty as to property rights result in a decision by the improver to abstain from an otherwise inefficient use of the property.
145. See id. at 1306-08.
146. See United States v. Carroll Towing Co., 159 F.2d 169, 173-74 (2d Cir. 1947).
147. But see Richard W. Wright, Hand, Posner, and the Myth of the "Hand Formula, " 4 THEORETICAL INQUIRES L. 145 (2003) (arguing that no one, even judges who espouse the Hand formula, actually uses it to resolve negligence cases).
148. Sterk, supra note 115, at 1308-11.
149. Sterk's demonstration that liability rules lead to fewer inefficient searches than property rules assumes that would-be improvers make decisions based on actual knowledge of H, an assumption that Sterk acknowledges to be "often unrealistic." Id. at 1318. This does not invalidate Sterk's conclusion that property rules are likely to lead to inefficient searches that would not take place under a liability regime; it merely means that this fact alone does not call for wholesale abandonment of property rules, as Sterk himself points out.
150. See id. The cost of these inefficient searches should properly be entered in the left hand column of our ledger above.
151. See discussion supra notes 115-17 and accompanying text.
152. See Wetherbee, 22 Mich, at 320-21.
153. Id. at 312.
154. See, e.g., Griffin v. Red Run Lodge, Inc., 610 F.2d 1198, 1202 (4th Cir. 1979) (noting that to establish innocent obstruction of an easement, a "defendant would have to show it reasonably had no notice of the [plaintiffs'] rights, or that, with knowledge of those rights, it made a good faith effort to locate an [improvement] ... but strayed . . . because of a good faith error by an independent surveyor as to the boundaries of the easement").
155. See, e.g., Stroup v. Codo, 212 N.E.2d 518, 520 (III. App. Ct. 1965) (defendant's contractor made measurements from stakes at corners of lot shown on plat);
156. Urban Site Venture II L.P. v. Levering Assoes. L.P., 665 A.2d 1062, 1067 (Md. 1995) (defendant relied on survey that contradicted earlier survey);
157. Dundalk Holding Co. v. Easter, 137 A.2d 667 (Md. 1958) (defendant relied on surveyor);
158. Proctor v. Huntington, 192 P.3d 958, 962 (Wash. Ct. App. 2008) (defendants relied on surveyor's mistaken identification of boundary marker).
159. See Smith, Intellectual Property, supra note 29, at 1770 (describing the "high degree of modularity" promoted by the law of accession).
160. See id. (describing the court's function in accession).
161. See id. (noting that by "valuing the lesser contribution," the court is able to identify the contribution more easily valued).
162. Proctor, 192 P.3d at 964.
163. See Henry E. Smith, Exclusion & Property Rules in the Law of Nuisance, 90 VA. L. REV. 965, 993-94 (2004) [hereinafter Smith, Exclusion & Property Rules].
164. See id. at 999.
165. See id. (highlighting courts' willingness to recognize the class of "tangible but nontrespassory invasions" as fitting into the category of nuisance). Beyond this, one might define a further category of nuisance cases involving harms that do not stem from any physical alteration of the resource in question.
166. See infra note 143 and accompanying text.
167. Madison v. Ducktown Sulphur, Copper & Iron Co., 83 S.W. 658, 659 (Tenn. 1904).
168. Id. at 659-60. The Madison nuisance falls into the second category of non-possessory uses, because the defendant copper plant owners were responsible for the movement of something that is not a discrete physical object (smoke) that nevertheless altered the qualities of plaintiff's resources (their farms).
169. See id. at 660.
170. See id. ("[I]f the injunctive relief sought be granted, the defendants will be compelled to stop operations, and their property will become practically worthless-").
171. See id. at 660 (reasoning that the strict exclusion remedy of an injunction would force defendants to close their plant, thereby destroying a valuable state industry).
172. See supra tbl.A (comparing the costs of maintaining exclusion and governance strategies).
173. See RESTATEMENT (SECOND) OF TORTS §821F (1977) (stating that liability for nuisance exists "only to those to whom it causes significant harm");
174. see also Madison, 83 S.W. at 662 (indicating that to succeed on a claim for nuisance, "the injury must be clearly established").
175. Think about what this means if analogized to the realm of possessory conflicts. It is as though A, in order to prevent B from using his land or chattel (or to recover it from nonconsensual occupation), were required to show that B was actually using the property in a way that caused significant harm. It would not be enough for A merely to show that B was using A's land or chattel without permission.
176. See RESTATEMENT (SECOND) OF TORTS §821F (stating that harm must be "of a kind that would be suffered by a normal person in the community or by property in normal condition and used for a normal purpose").
177. Id. §82 IF cmt. c (explaining that the public nuisance standard of "[s]ignificant harm" is met by showing "particular harm [that] must be significant in character").
178. Note that this is a question separate from whether liability should result in application of a liability or a property rule.
179. See RESTATEMENT (SECOND) OF TORTS §§822-831 (listing multiple factors to be weighed when determining the gravity of a particular harm at issue). These factors include the following: the utility of the use, whether one use outweighs the other, whether this comparison renders the use unreasonable, whether the invasion of the other's interest is intentional, and whether all these things put together result in an actionable nuisance.
180. See id.
181. RESTATEMENT (SECOND) OF TORTS §821D.
182. Although "purely aesthetic nuisances" are rarely found to be actionable, some courts have held to the contrary. See Smith, Exclusion & Property Rules, supra note 127, at 999-1000 n.103 (providing examples of cases granting relief for aesthetic nuisances and recognizing that modern commentators appear to be "favorable to the idea of aesthetic nuisance").
183. Id. at 998-99.
184. See id. at 998.
185. Id. at 1000-07.
186. Madison v. Ducktown Sulphur, Copper & Iron Co., 83 S.W. 658 (Tenn. 1904).
187. See id at 659.
188. Id. at 659-60 (noting that a period of ten years passed between the operation of the plants and the time the suit was filed). Considering the delay in the plaintiffs' action, the court found that the request for injunctive relief against one of the two defendants was barred by laches.
189. Id. at 664. Nevertheless, the court described the potential injunction as though it would stop operation of both copper plants.
190. Id. at 661.
191. See Smith, Exclusion & Property Rules, supra note 127, at 998-1005 (discussing the locational approach to nuisance cases and the resulting reduction in the difficulty in identifying and complying with one's duty to avoid use conflicts).
192. See supra note 128 and accompanying text (discussing Smith's examples of physical phenomena caused by nuisance).
193. Compare RESTATEMENT (SECOND) OF TORTS §821D (1977) ("A private nuisance is a nontrespassory invasion of another's interest in the private use and enjoyment of land."), with Smith, Exclusion & Property Rules, supra note 127, at 998-1005 (outlining the locational approach).
194. Madison, 83 S.W. at 666-67.
195. See id. at 660 (noting that the complainant had lived on and cultivated his farm for twenty or more years).
196. Id. at 664.
197. Id. at 660, 666-67.
198. Id. at 659.
199. Id. at 666.
200. Epstein, A Clear View, supra note 18, at 2102; see also Madison, 83 S.W. at 667 (awarding damages-instead of an injunction-to the plaintiff-farm owners in order to preserve the valuable copper mines operated by defendants).
201. Epstein, A Clear View, supra note 18, at 2102.
202. Id.
203. Epstein's Rule, of course, is not to be confused with Epstein's Law. See supra notes 57-58 and accompanying text (explaining Epstein's Law).
204. See Epstein, A Clear View, supra note 18, at 2102.
205. See supra note 60 and accompanying text.
206. See supra Part IV.B (discussing the law of accession).
207. See supra Part I V.B.
208. See Madison v. Ducktown Sulphur, Copper & Iron Co., 83 S.W. 658, 660 (Tenn. 1904).
209. See Warden, supra note 105, at 705-09 ("Where an encroachment by an adjoining landowner is intentional or wilful, a mandatory injunction will ordinarily be granted to compel its removal, without regard for the relative conveniences or hardships which may result from ordering its removal.").
210. Proctor v. Huntington, 192 P.3d 958, 964 (Wash. Ct. App. 2008).
211. Madison, 83 S.W. at 666-67.
212. See Smith, Exclusion & Property Rules, supra note 127, at 1043 (advocating for a technique that "refus[es] a blanket after-the-fact... liability rule approach").
213. See supra Part III.A.
214. See, e.g., Iglesias v. Mut. Life Ins. Co., 156 F.3d 237, 243 (1st Cir. 1998) ("The equitable doctrine of laches allows a court to dismiss a claim 'where a party's delay in bringing suit was (1) unreasonable, and (2) resulted in prejudice to the opposing party.'" (quoting K-Mart Corp. v. Oriental Plaza, Inc., 875 F.2d 907, 911 (1st Cir. 1989))).
215. Epstein, A Clear View, supra note 18, at 2094.
216. Smith, Intellectual Property, supra note 29, at 1795.
217. Id. (noting that in early U.S. patent law, patents were mainly granted to inventions "embodied in some apparatus, a physical thing").
218. See id. at 1795-96.
219. Id. at 1796.
220. Id. at 1796-97.
221. See, e.g., id. at 1785 (asserting that governance strategies isolate "uses and users in more detail," and thus impose higher informational costs).
222. See id. at 1795.
223. See generally JAMES BESSEN & MICHAEL J. MEURER, PATENT FAILURE: HOW JUDGES, BUREAUCRATS, AND LAWYERS PUT INNOVATORS AT RISK 46-72 (2008) (discussing the difficulty of discerning patent boundaries).
224. For a discussion of the numerus clausus principle as applied to property law-that similar to rights in civil law, "property rights must conform to certain standardized forms"-see Merrill & Smith, supra note 86, at 4.
225. See JON W. BRUCE & JAMES W. ELY, JR., THE LAW OF EASEMENTS AND LICENSES IN LAND §2:10 (2009) ("[A] negative easement enables the holder to prevent the owner of the servient estate from doing things the owner would otherwise be entitled to do.").
226. See Susan F. French, Toward a Modem Law of Servitudes: Reweaving the Ancient Strands, 55 S. CAL. L. REV. 1261, 1267 (1982) (observing traditional types of negative easements that were recognized at common law);
227. see also United States v. Blackman, 613 S.E.2d 442, 446 (Va. 2005) ("The traditional negative easements recognized at common law were those created to protect the flow of air, light, and artificial streams of water, and to ensure the subjacent and lateral support of buildings or land.").
228. See BRUCE & ELY, supra note 184, at §2:10 ("A negative easement does not permit the holder to enter or use the servient estate; it limits the right of the servient owner to utilize the servient owner's own land. Historically a negative easement was considered appurtenant.");
229. see also Blackman, 613 S.E.2d at 446 (explaining that negative easements "are, by their nature, easements appurtenant, as their intent is to benefit an adjoining or nearby parcel of land").
230. See RESTATEMENT (THIRD) OF PROPERTY: SERVITUDES §2.6(2) (1998) ("The benefit of a servitude may be granted to a person who is not a party to the transaction that creates the servitude.").
231. See, e.g., Brace v. United States, 72 Fed. Cl. 337, 364 (Fed. Cl. 2006), affd, 250 Fed. App'x 359 (Fed. Cir. 2007) (noting that forty-seven states have enacted legislation allowing for conservation easements because "the equitable enforcement" of negative easements in gross was prohibited). For a general description of the "uncertainty and difficulties" inherent in the creation of enforceable conservation easements under traditional common law rules that negative easements could not be transferred,
232. see RESTATEMENT (THIRD) OF PROPERTY: SERVITUDES §1.6 cmt. a. As a result, there was "widespread enactment of statutes" to overcome the problematic common law rules, and in 1981, the Uniform Conservation Easement Act was announced.
233. Id.;
234. see also id. §2.6 cmt. a. ("Early law prohibited the creation of servitude benefits in gross and the creation of servitude benefits in persons who were not immediate parties to the transaction.").
235. See generally JESSE DUKEMINIER & JAMES E. KRIER, PROPERTY 855-57 (5th ed. 2002) (outlining the history of restrictions on negative easements in England that were later adopted by U.S. courts);
236. RICHARD R. POWELL, POWELL ON REAL PROPERTY §34.16 (Michael Allan Wolf ed., Matthew Bender & Co. 2009) (1949) (detailing the evolution of juristic attitudes toward transfer of easements in gross);
237. John L. Hollingshead, Conservation Easements: A Flexible Tool for Land Preservation, 3 ENVTL. LAW. 319, 327 (1997) (noting that where the benefit of an easement is held in gross, some courts do not allow the burden to run with the land).
238. See Merrill & Smith, supra note 86, at 23-24.
239. Id. at 19-20.
240. See 17 U.S.C. §106 (2006) (granting copyright holders exclusive rights to reproduce, prepare derivative works based on, distribute copies of, and-with respect to some kinds of work-to perform or display the copyrighted work);
241. U.S.C. §271(a) (2006) (defining patent infringement as "mak[ing], us[ing], offer[ing] to sell, or sell[ing] any patented invention" without authorization).
242. Smith, Intellectual Property, supra note 29, at 1780; see also infra note 238 and accompanying text.
243. See 35 U.S.C. §271 (a); Smith, Intellectual Property, supra note 29, at 1795.
244. This rough calculation is based on information from the U.S. Patent Office concerning the numbers of patents issued per year from 1991 to 2007. See U.S. Patent Statistics Chart: Calendar Years 1963-2007, available at http://www.uspto.gov/web/offices/ac/ido/oeip/taf/us-stat.htm.
245. It assumes that maintenance fees on patents of various ages are paid the same percentage of the time that they were in 1998. See also Mark A. Lemley, Rational Ignorance at the Patent Office, 95 Nw. U. L. REV. 1495, 1504 (2001) (recording the "[p]ercentage of [p]atents for [w]hich [maintenance [f]ees [w]ere [p]aid" in 1998).
246. See BESSEN & MEURER, supra note 182, at 51 -68 (comparing the levels of difficulty for running a land title search with that of running a patent search);
247. cf. Merrill & Smith, supra note 86, at 44-45 (arguing that notice of idiosyncratic property rights, even if given through a centralized land register, is insufficient to restrict the information costs on third parties to justifiable levels).
248. See BESSEN & MEURER, supra note 182, at 68-71 (discussing the "[p]atent [f]lood" and observing that "firms are [often] sued over patents covering distant technologies").
249. See Merrill & Smith, supra note 86, at 27-33 (discussing problems that would be inherent in the creation of a "fanciful" servitude-for example, by creating a time-share in a watch).
250. See BESSEN & MEURER, supra note 182, at 68-71 (discussing the various information costs caused by proliferation of IP rights in patent law).
251. See id.
252. Again, a patentee is appropriating use privileges from their prior owners. This vests in her-the patentee-in the form of use rights-that is, the right to exclude others from these uses. Although the patentee has taken away the others' privilege to use the patented invention, she is left with only a right to exclude and may not have the privilege to use it herself.
253. See 35 U.S.C. §112 (2006) (requiring that patent applicants provide specifications that include "a written description of the invention" sufficient "to enable any person skilled in the art ... to make and use [it]," as well as a description of "the best mode contemplated by the inventor of carrying out his invention").
254. See 35 U.S.C. §112 (describing the requirements for the specifications portion of the patent application).
255. U.S.C. §102 (setting forth the novelty requirements).
256. U.S.C. §101 (providing that the invention must be "new and useful").
257. U.S.C. §112 (mandating that an inventor include specifications in enough detail to enable a person of ordinary skill in the art to build the invention).
258. U.S.C. §103 (setting forth the requirements for non-obvious subject matter).
259. See Smith, Property Rules, supra note 18, at 1781-83 (explaining that a "taker will be able to pick out a class of assets that has a higher mean value than the one that the courts have identified, and courts cannot cost-effectively keep up").
260. An example of this type of owner is someone who discovered the invention independently of-but subsequent to-the patentee and discovery, but did not put the invention to public use more than a year before the filing of the patentee's application. See 35 U.S.C. § 102(a)-(b) (stating that such independent discovery and use would not invalidate that patent).
261. Such owners are also likely to place a high idiosyncratic value on the use rights lost, as people often do with things that they feel they have created themselves.
262. U.S.C. §103(a).
263. The rationale here may be valid: we want to afford inventors space within which to prepare a patent application and not force them to keep the invention secret while doing so. Nevertheless, the effect on the value of what is offered to the public in exchange for patent rights is as described.
264. See generally Smith, Intellectual Property, supra note 29, at 1766-77 (exploring "[r]ights in [information [t]hrough the [l]ens of [accession [l]aw").
265. Id. at 1771.
266. Id.
267. See, e.g., Wetherbee v. Green, 22 Mich. 311, 318-20 (1871) (discussing the operation of the law when property is improved and unable to be divided).
268. Smith, Intellectual Property, supra note 29, at 1771.
269. See Gordon, supra note 51.
270. See generally Smith, Intellectual Property, supra note 29, at 1766-77 (offering a comparison of IP rights to the law of accession).
271. See eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388, 390-91 (2006) (noting that the petitioner, eBay, invested resources to operate a popular website that was accused of infringing a patent held by another company).
272. See Lemley & Weiser, supra note 10, at 797-98 ("As a striking example, literally thousands of patents have been identified as essential to the proposed new standards for 3G cellular telephone systems, and more than four hundred patents are necessary to produce a DVD." (citations omitted)).
273. For example, a car is useless without wheels. But one could say the same thing about a car without a gas tank or a car without spark plugs. How would one go about allocating the value of the car according to the relative contributions made by these various components when each of them is equally necessary?
274. Wetherbee v. Green, 22 Mich. 311, 312 (1871).
275. The same is true in nuisance cases, where the relevant question is not "how much of the factory's value is due to the pollution of plaintiffs land," but rather "how does the value of the factory compare to the value of plaintiff s land before it was polluted?"
276. See, e.g., Wetherbee, 22 Mich. at 318, 320 (discussing the appropriated chattel in this case, which was cut timber).
277. See, e.g., S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081, 1088 (9th Cir. 1989) (concluding that "copyright licenses are assumed to prohibit any use not authorized").
278. For example, the consideration may consist of not only money but also of the crosslicensing of the licensee's own intellectual property.
279. It is necessary to discern a market price for the use at issue, otherwise the calculation of damages would be impractical. See, e.g., Arnold, supra note 95, at 112-13 (noting that in applying the accession doctrine, damages are measured according to the "value of the article in its improved state").
280. In the context of the accession rule, courts will likely favor the improver when the improved value is higher than that of the original article. See, e.g., Wetherbee, 22 Mich, at 320.
281. See supra Part VI.B.
282. See, e.g., Madison v. Ducktown Sulphur, Copper & Iron Co., 83 S.W. 658, 662 (Tenn. 1904) (determining that courts may give deference to the creator of the nuisance when the nuisance is a legal trade operating in good faith).
283. See supra Part VI-VLA.
284. See David L. Schwartz, Practice Makes Perfect? An Empirical Study of Claim Construction Reversal Rates in Patent Cases, 107 MICH. L. REV. 223, 240, 251-52 (2008) (studying appealed cases where the trial court was found to have wrongly construed at least one patent term, which occurs 38.8% of the time, and noting that this rate does not improve with the level of patent experience of the trial court).
285. See Wilson Sporting Goods Co. v. Hillerich & Bradsby Co., 442 F.3d 1322, 1326-27 (Fed. Cir. 2006) (holding that without any information about the accused products, the "record lacks the complete context for accurate claim construction");
286. Cheryl Lee Johnson, The Continuing Inability of Judges to Pass Their Markman Tests: Why the Broken System Leaves Judges Behind, Confused and Demoralized, in MARKMAN HEARINGS AND CLAIM CONSTRUCTION IN PATENT LITIGATION 2008, at 65, 71 (Thomas L. Creel 2008) (discussing the chronic inability of judges to consistently "construe highly abstruse patent claims cloaked with technical jargon,"despitetheirpresumed exegetical skills).
287. See supra Part VI.B;
288. see also, e.g., Agrizap, Inc. v. Woodstream Corp., 520 F.3d 1337, 1339 (Fed. Cir. 2008) (concluding that Agrizap's patent for a device to kill rodents was invalid due to obviousness).
289. John R. Allison & Mark A. Lemley, Empirical Evidence on the Validity of Litigated Patents, 26 AIPLA Q.J. 185, 194, 205 (1998) (finding that from 1989 to 1996, forty-six percent of "final validity decisions by either district courts or the Federal Circuit reported in the U.S.P.Q." found the patent at issue to be invalid);
290. see BESSEN & MEURER, supra note 182, at 277 (explaining that although the Patent Office provides a reexamination procedure, firms are often hesitant to use it because it "places firms at a disadvantage if subsequent litigation occurs").
291. See also BESSEN & MEURER, supra note 182, at 131-32 for a discussion of the costs of litigation, showing that estimated legal costs of litigating patent suits through trial range from $610,000 to $4.14 million, depending on the amount of damages at stake.
292. See Lemley & Shapiro, supra note 3, at 2032-33 ("The average royalty rate granted in all reasonable-royalty cases is 13.13% of the price of the infringing product.").
293. See Robert P. Merges, Contracting into Liability Rules: Intellectual Property Rights and Collective Rights Organizations, 84 CAL. L. REV. 1293, 1308-16 (1996) (discussing the marketdistorting effects of compulsory license rates in the context of "cover" songs).
294. See 35 U.S.C. §284 (2006).
295. Id. (noting only that damages should be "adequate to compensate for the infringement").
296. SRI Int'l, Inc. v. Advanced Tech. Labs., Inc., 127 F.3d 1462, 1464 (Fed. Cir. 1997).
297. See Read Corp. v. Portee, Inc., 970 F.2d 816, 826-27 (Fed. Cir. 1992).
298. The willfulness standard, in other words, was congruous to the standard for innocent encroachment.
299. In re Seagate Tech., 497 F.3d 1360, 1371 (Fed. Cir. 2007).
300. Id.
301. Id. ("Because we abandon the affirmative duty of due care, we also reemphasize that there is no affirmative obligation to obtain opinion of counsel.").
302. See, e.g., Moore v. Regents of the Univ. of Cal., 793 P.2d 479, 509 (Cal. 1990) (Mosk, J., dissenting) (explaining that property law seeks to protect an object with a related "bundle of rights").
303. See, e.g., In re Engage, Inc., 544 F.3d 50, 54 (1st Cir. 2008) (noting that receiving a patent gives the owner "a property interest-to exclude others from use of the property").
304. See John Copeland Nagle, Moral Nuisances, 50 EMORY L.J. 265, 286-87 (2001) (discussing the evolving academic and judicial views of aesthetics in nuisance case law).
305. Smith, Intellectual Property, supra note 29, at 1786.
306. See, e.g., SRI Int'l, Inc. v. Advanced Tech. Labs., Inc., 127 F.3d 1462, 1464 (Fed. Cir. 1997) (affirming the award of enhanced damages in a patent infringement action).