Property Rules, Liability Rules and Externalities

2006 ◽  
Vol 24 (2) ◽  
pp. 99-126
Author(s):  
Antonio Nicita ◽  
Matteo Rizzolli
Keyword(s):  
Property Rights ◽  
Transaction Costs ◽  
Property Right ◽  
Legal Systems ◽  
Liability Rule ◽  
Liability Rules ◽  
Ex Ante ◽  
Court Intervention ◽  
Property Rule

Abstract In this paper we argue that traditional explanations of the dichotomisation of property rules and liability rules are somehow misleading, since they tend to neglect the evolutionary complementarity between die two rules in a world of incomplete property rights characterised by sizeable ex-ante transaction costs in rights’ definition. When rights are a complete bundle of well-defined uses, the application of a property rule reaffirms and reinforces the correlation between rights and duties. In a world of incomplete rights, externalities over undefined uses call for a court intervention aimed at defining a new property right through either a property rule or a liability rule. Independently of whether new rights are created by property or liability rules, die nature and die extent of future externalities over conflicting undefined uses could generate new processes of rights’ definition. The emergence of an externality always implies an evolutionary complementarity between property rules and liability rules whose boundaries actually depend, in alternative legal systems, on die degree of incompleteness of original rights.

scholarly journals Should Property or Liability Rules Govern Information?

2016 ◽  
Author(s):  
Mark Lemley
Keyword(s):  
Property Rights ◽  
Patent Law ◽  
Property Right ◽  
Liability Rule ◽  
Liability Rules ◽  
Significant Aspect ◽  
Digital Copyright ◽  
Injunctive Relief

This Article focuses on an unappreciated and significant aspect of thedebate over property rules in the technology law context. In particular, itargues that the classic justification for legal entitlements protected by aproperty rule - i.e., a right to injunctive relief - depends on the abilityto define and enforce property rights effectively. In the case of manytechnology markets, the inability to tailor injunctive relief so that itprotects only the underlying right rather than also enjoining noninfringingconduct provides a powerful basis for using a liability rule (i.e.,awarding the relevant damages to the plaintiff) instead of a property rule.Notably, where injunctive relief cannot be confined to protecting theunderlying right, the availability of such relief can give rise to a"holdup strategy," whereby a firm threatens or uses litigation to obtain asettlement significantly in excess of any harm it suffers. Such strategies,as the Article explains, arise in a variety of technology law contexts,including patent law, digital copyright cases, and spectrum regulation.Depending on the particulars of the context, either courts or agenciesshould superintend the relevant liability regime and, in some cases, theadministrative challenges may undermine the case for a liability rule atall. Unfortunately, legal scholars have generally focused on thesubstantive debate as to the proper scope of property rights - oftenarguing for an all or nothing solution - at the expense of evaluating theinstitutional considerations as to whether and when courts or agencies cansuperintend a liability regime in lieu of a property right.

Incorporation Rules

2014 ◽  
Vol 10 (1) ◽  
pp. 1-30
Author(s):  
Adi Ayal ◽  
Yaad Rotem
Keyword(s):  
Capital Structure ◽  
Legal Theory ◽  
Liability Rule ◽  
Heterogeneous Preferences ◽  
Legal Personality ◽  
Ex Post ◽  
Ex Ante ◽  
And Control ◽  
Property Rule

AbstractFollowing Calabresi and Melamed, legal theory has employed the property rule/liability rule distinction in order to hone our understanding of existing norms, as well as suggest new ones. This paper suggests an addition to the pantheon in the form of a protocol that we call an “Incorporation Rule”. It is a novel mechanism allowing private parties and courts to combine property rule and liability rule protection where both apply to the same entitlement. Incorporation Rules allow for separating the effects of intertwined property and liability rules, focusing on ex-ante voluntary determination of levels of protection usually adjudicated ex-post. Under the protocol, the entitlement is transferred to a special-purpose corporate vehicle, which then issues tailor-made securities to the owner of the entitlement and to the potential buyer or rivalrous user. In this manner, the entitlement is split along the contours of three basic corporate instruments – heterogeneous capital structure, separation of ownership and control, and an independent legal personality. By relying on these known-and-tested corporate mechanisms, risk and transaction costs are minimized, enforcement is improved, and heterogeneous preferences of individuals can be accommodated. The Incorporation Rule protocol thus allows for flexibility in protecting entitlements while facilitating efficient exchange.

scholarly journals An Economic Justification for Open Access to Essential Medicine Patents in Developing Countries

2009 ◽  
Vol 37 (2) ◽  
pp. 184-208 ◽  
Author(s):  
Sean Flynn ◽  
Aidan Hollis ◽  
Mike Palmedo
Keyword(s):  
Intellectual Property ◽  
Property Rights ◽  
Intellectual Property Rights ◽  
Essential Medicine ◽  
Compulsory License ◽  
Liability Rule ◽  
Liability Rules ◽  
The Government ◽  
The Right ◽  
The U.S

Not all intellectual property rights grant the right to exclude that is indicative of “property rules,” as that term was used by Guido Calabresi and A. Douglas Melamed in their seminal article. Some intellectual property rights are “liability rules,” in which the right holder has an entitlement to compensation for use of the protected invention, not a right to preclude the use. Although patent laws normally grant a right to exclude others from use of the protected invention as a default, most countries’ laws allow the government to convert the patent property rule into a liability rule through a compulsory license. It has been noted, for example, that by the end of the 1950s, the U.S. had issued compulsory licenses covering 40 to 50 thousand patents, including substantial portions of the patent portfolios of AT&T, General Electric, IBM, and Xerox. The U.S. Supreme Court recently expressed a willingness to accept liability rules over injunctions in some patent infringement cases.

Property Rules versus Liability Rules

2020 ◽  
pp. 191-203
Author(s):  
Stephanie M. Stern ◽  
Daphna Lewinsohn-Zamir
Keyword(s):  
Property Rights ◽  
Transaction Costs ◽  
Legal System ◽  
Liability Rules ◽  
Behavioral Studies ◽  
Additional Support ◽  
Mutual Agreement ◽  
Psychological Studies

This chapter discusses one of the most fundamental issues that every legal system must address: the form of protection that should be given to legal entitlements, including property rights. The chapter summarizes the debate regarding the choice between property rules and liability rules, and its underlying assumptions. It then shows how behavioral studies offer important considerations that should influence the legal discussion. Generally speaking, psychological studies invite more optimism about people's ability to reach mutual agreement under property rules and suggest that miscalculations of damages under liability rules may be a graver danger than presently realized. These studies caution us against increasing the use of liability rules and lend additional support to the use of property rules when transaction costs are low.

“Coase Theorem”, Competitive Market and Products Liability Law

1985 ◽  
Vol 20 (1) ◽  
pp. 39-48 ◽  
Author(s):  
Israel Gilead
Keyword(s):  
Transaction Costs ◽  
Point Of View ◽  
Coase Theorem ◽  
Invisible Hand ◽  
Market Forces ◽  
Liability Rule ◽  
Products Liability ◽  
Liability Rules ◽  
Liability Law ◽  
External Intervention

According to the famous “Coase Theorem”, market forces, under given conditions, will automatically, without any external intervention, bring about an efficient allocation of resources. These conditions, necessary for the smooth operation of the “invisible hand” which leads to efficiency, are denoted as “absence of transaction costs”, as the presence of transaction costs may impede this desired process. The main legal implication outlined by Coase is that absent transaction cost, there is no need, and no place, from an efficiency point of view, for liability rules: resource allocation would be the same either with or without them. An act which is efficient will be carried out despite a liability rule which imposes the burden of compensation on the actor. On the other hand, an inefficient act will be barred by market forces without the help of liability rules.

CONSTITUTIONAL AND TRANSLATIVE ACQUISITION OF RIGHTS IN THE CONTEXT OF THE DOCTRINE OF OWNERSHIP TRANSFER

2017 ◽  
Author(s):  
Myroslava Hudyma ◽  
Keyword(s):  
Property Rights ◽  
Property Right ◽  
Legal Capacity ◽  
Close Attention ◽  
Ownership Transfer ◽  
The Right ◽  
Qualitative Characteristics

Within the framework of the general doctrine of constitutive and translational acquisition of rights, the publication made an attempt to identify their suitability for describing the phenomenon of ownership transfer. The general characteristics of translational and constitutive acquisition of rights are analyzed, their differences are highlighted, and it is emphasized that the specified types can cover such legal situations as full transfer of the right (the right as a whole), and transfer of a part of powers (as components of the certain right). The paper underlines that the differences between the types of acquisition of rights are not so much quantitative (one jurisdiction or their complex is transferred), as qualitative characteristics and such issues are especially relevant in the spectrum of research on the transfer of ownership as a right that includes a triad of powers. Close attention is paid to the construction of constitutive acquisition of right, the possibility of use of which is extremely controversial, due to the overwhelming denial of the correctness of separation and alienation of a separate authority from ownership right, because the approval of the latter will lead to theoretical dissonance on the existence of incomplete (split ownership). It is emphasized that the application of the construction of the transfer of authority can take place in different shades of meaning and be combined with the right alienation, and without it. Therefore, the construction of right granting without alienation of the right is quite viable. Moreover, the transfer of one or even several powers of the owner is not only practically possible, but also necessary to establish limited property rights on the basis of full property right (ownership right). However, it is noted that in these cases, the acquirer will not receive the right of the alienator as a whole, but only certain legal possibilities of behavior in relation to a particular good. The legal capacity of the acquirer will not coincide with the legal capabilities of the alienator in content and scope, and therefore to talk about the transfer of ownership is incorrect, only a certain authority (powers) of the owner will be transferred, provided its (their) separation admissibility. The paper concludes that the specifics of property rights, which forms a triad of indivisible powers, determines the possibility of applying the construction «transfer of ownership» only to cases of translational acquisition of right, in which the acquirer receives a right identical to the right of the grantor both in content and volume.

Property Rights, Fiduciary Duties, and the Control of Assets

2018 ◽  
Author(s):  
Aruna Nair
Keyword(s):  
Property Rights ◽  
Case Law ◽  
Property Right ◽  
Formal Structure ◽  
Fiduciary Duties ◽  
Legal Power ◽  
The Law ◽  
Fiduciary Relationships ◽  
Relationship Of

This chapter examines the law governing the availability of claims to traceable proceeds. It argues that the language used in the case law—which uses the terminology of property rights and of fiduciary relationships—cannot fully explain the law, since such claims are often available in the absence of fiduciary duties and are not available to holders of many types of property right. It argues that such claims instead presuppose a relationship of ‘control of assets’: where the defendant has a legal power to deal with some asset, correlating to a vulnerability to a loss of rights in that asset on the part of the claimant, and coupled with a duty not to exercise the power. It argues that relationships that have this formal structure also share normative characteristics that justify the subordination of defendant autonomy that has been shown to be at the heart of the tracing concept.

scholarly journals Economic Analysis of Accident Law: A New Liability Rule that Induces Socially Optimal Behaviour in Case of Limited Information

2020 ◽  
Vol 0 (0) ◽  
Author(s):  
Astha Srivastava ◽  
Ankur Srivastava
Keyword(s):  
Nash Equilibrium ◽  
Economic Analysis ◽  
Standard Of Care ◽  
Limited Information ◽  
Liability Rule ◽  
Rule Based ◽  
Liability Rules ◽  
Levels Of Care ◽  
Unique Nash Equilibrium ◽  
Optimal Behaviour

AbstractIn accident law, we seek a liability rule that will induce both the parties to adopt socially optimal levels of precaution. Economic analysis, however, shows that none of the commonly used liability rules induce both parties to adopt optimal levels, if courts have access only to ‘Limited Information’ on. In such a case, it has also been established (K. (2006). Efficiency of liability rules: a reconsideration. J. Int. Trade Econ. Dev. 15: 359–373) that no liability rule based on cost justified untaken precaution as a standard of care can be efficient. In this paper, we describe a two-step liability rule: the rule of negligence with the defence of relative negligence. We prove that this rule has a unique Nash equilibrium at socially optimal levels of care for the non-cooperative game, and therefore induces both parties to adopt socially optimal behaviour even in case of limited information.

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