Volume 2014 — Issue 2

The recording industry and Hollywood in general have responded to declining music sales by attempting to expand excessively intellectual property protection, domestically through the proposed, yet indefinitely postponed, Stop Online Piracy Act and the Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act, and internationally through the Anti-Counterfeiting Trade Agreement and the intellectual property provisions of the Trans-Pacific Partnership Agreement. Such legislation restricts free speech, reduces innovation, and weakens due process rights on the internet. This paper proposes an alternative revenue-generating strategy—bespoke musical recordings that would be privately auctioned rather than publicly released. For example, a recording of Anne-Sophie Mutter playing a piece she has never publicly performed would be sold to a music lover or an investment fund as a one-of-a-kind recording, as unique as an Artemisia Gentileschi painting or a Camille Claudel sculpture. Besides providing the recording industry with additional revenue, bespoke recordings would generate more income for musicians, augment funds for music outreach programs and other music nonprofits, and increase the chances of discovering new musical talent. Similarly to many new markets, it would take time for such recordings to generate substantial revenue. To aid the development of a fluid market for bespoke recordings, numerous new legal and institutional arrangements would be established, including a bespoke recording registry, tailored contractual agreements, anti-counterfeit protections, and a secure bespoke recording storage facility. By facilitating an extreme form of ownership for isolated recordings, we might prevent the overall expansion of the intellectual property regime.

In this paper we seek to offer an original theoretical platform for thinking about the nature of legal knowledge produced through ‘legal interdisciplinarity.’ The context for our discussion is the emergence of a ‘behavioural boom’ in the field of law where researchers increasingly turn to fields like behavioural economics to encourage shifts in legal and social governance architecture. Using a case study which explores the application of a sub-branch of psychology to civil law, we highlight serious concerns attending the capacity of lone legal researchers to meaningfully navigate non-legal domains. Central to our analysis, is the sociology of expertise and experience, and it is from this perspective that we explore the interdisciplinary process. Drawing attention to the extent to which largely “unwritten” practices and conventions inhabit disciplines and how these govern knowledge, we point to the insurmountable barriers confronting lone legal interdisciplinarians. We illustrate why that work, by contrast with genuine collaborative/interactional interdisciplinary research, should be regarded as lacking value from a policy/political perspective. This is not, however, to diminish the potential value of works of a non-collaborative nature. Noting the value of interdisciplinary work of a more provisional and creative character, and its critical importance to the legal project, we draw a critical distinction between interactional research and simulated research. This distinction we argue proves critical to identifying what interdisciplinary work can lend itself to policy application and that which cannot, as well as accommodating the fullest range of interdisciplinary research efforts to flourish.

The first sale doctrine provides that when a patent holder unconditionally authorizes another party to sell a patented item, the patent holder’s right to exclude with respect to the patented item is “exhausted.” The licensee can then sell the patented item to a third party—a downstream purchaser—and the patent holder will not be able to sue the third party for patent infringement based on the resale or other use of that item. A principal animating policy behind the exhaustion doctrine is to prevent patent holders from receiving overcompensation for their patented inventions by, for example, aggregating royalties along multiple points in the production and distribution chain.
Patent holders settling infringement litigation often seek to draft a license agreement that precludes application of the exhaustion doctrine, so that they may continue to pursue licensed products downstream. Such provisions are likely ineffective if drafted as post-sale restrictions on what downstream purchasers may do with their patented products. However, it is possible to contract around exhaustion by limiting the scope of the authorized sale (a “pre-sale restriction”) or through other clever licensing devices that are described in this paper.
But should such provisions be enforceable? The prevailing view in the academic literature argues from a law and economics perspective that it is economically efficient to allow patent holders to license their patents at multiple points along the production chain, and that the free market will curb patent holders’ ability to receive double-recovery.
This article counters the law and economics literature to argue that such provisions should not be enforced if they are brokered as part of a litigation settlement. The litigation settlement context distorts the economic efficiencies allegedly created by contracting around exhaustion and can prevent free market checks on double-recovery. The expense and risk of litigation, the threat of injunctions, and the pressure to settle can weigh heavily on the patent infringement defendant. The license fee that is negotiated may not be sufficiently discounted to account for the reservation of downstream rights preserved by the patent holder. This is particularly true in light of research in cognitive psychology indicating that litigants do not engage in economically rational behavior in making settlement decisions. Defendants will likely favor a lower settlement price in exchange for a provision contracting around exhaustion, and take the risk that litigation against downstream customers will be defeated or that indemnification can be avoided.
If there is a clear rule against contracting around exhaustion, the parties will set the license fee at a rate that gives the patent holder full compensation up front, and the defendant can simply pass along this extra cost to downstream purchasers. This efficiently avoids the costs of additional litigation against downstream purchasers.

In her book Talent Wants to Be Free, Lobel suggests a new, behavioral-economics, paradigm to employment intellectual property (EIP) law. Lobel describes a dynamic model to EIP control mechanisms such as non-competes, trade secrets and invention assignments, and argues that loosening them will create positive externalities to employers that will make such a shift economically justified. I first discuss the content of the book and the journey Lobel is guiding us through, trying to emphasize the important notions in it and taking them a step forward towards a more “radical” suggestion. I argue that the utilitarian debate over EIP controls cannot capture all the sensibilities of the legal aspects of human capital, and that a new legal framework should not be constructed according to an aggregate of positive and negative externalities, rather than upon moral/natural-law grounds that have an economic justification as well. I argue that although Lobel’s new model to EIP controls is very convincing and appealing to employers as well as to employees, there is a solid economical (as well as moral) ground for a dramatic change in the legal framework of EIP, regardless of the employers’ point of view. I examine this argument with a case study of the survival of the music industry albeit the turbulences it went through at the beginning of the technological era with the emergence of file sharing and other forms of piracy, and will present an economic model that supports the moral grounds for a legal paradigm shift.