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February 01, 2008

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Stewart Sterk

Molly’s article ties together doctrinal strands in such a compelling way that it leaves me asking myself why I hadn’t thought of the analogies in the same way. For me, that’s the mark of a successful piece. On top of that, her article raises some interesting questions for another day. I’ll raise three of them.
(1) Molly’s piece focuses on the reasons for judicial skepticism about enforcement of servitudes. With respect to land, she identifies three: notice and information costs, the problem of the future, and externalities, and then skillfully examines how those same reasons for skepticism apply with respect to intellectual property servitudes. But one could ask the question from another perspective. In light of the problems she identifies, why did courts enforce servitudes, despite the problems she identifies, all of which cast doubt on the assumption that a consensual servitude is value enhancing? One answer is that the servitude was the only effective mechanism for a landowner to deal with the monopoly power of his neighbor. Only a next-door neighbor can provide me with the assurance that I won’t live next door to a factory or apartment house; only my neighbor can assure me that my view won’t be blocked by a wall, etc. If easements and restrictive covenants were not enforceable, every time neighboring land were sold, the purchaser would be able to exert that monopoly power by demanding payment for agreeing not to build the factory or the wall, and I wouldn’t pay, because my neighbor could then turn around and sell, leaving me at the mercy of the new purchaser. This explanation dovetails with the common law’s reluctance to enforce affirmative covenants against successors. With affirmative covenants, neighbors typically enjoyed no monopoly power. If my neighbor didn’t agree to maintain a driveway over my land, I could always hire someone on the market to do the same thing. On this view, courts had a positive reason to enforce restrictive (but not affirmative) covenants, and that positive reason contributed to judicial willingness to overcome the problems Molly identifies. Is there a comparable positive reason for enforcing IP servitudes? What efficiency gains does enforcement of these servitudes promote? It seems to me that an answer to those questions would provide a nice bookend to Molly’s focus on the reasons for not enforcing servitudes.
(2) The increasing use of IP servitudes raises another interesting question: should licensors who extract servitudes on what we call intellectual property have to “opt out” of copyright protection? Copyright itself is largely premised on the fear that creators of intellectual works cannot contract with all potential users, and that without statutory protection, an author would be at the mercy of any user who could reproduce, display, produce derivative works, etc., thus destroying the market for the author’s work. But if that premise is wrong – if the author can impose a servitude that binds all potential users to license terms – then why afford copyright protection at all? Of course, a regime that required licensors to choose between servitudes and copyright would provide little benefit to potential users; the typical licensor would choose more onerous license terms that incorporated all copyright protections, and then some. But there might also be some leakage: users who, for some reason would not be charged with notice (because, for instance, someone had engineered the “click-wrap” out of a piece of software).
(3) Molly’s article does not focus at all on remedy, and I wonder whether the problems she identifies with enforcing IP servitudes might be significantly ameliorated by limiting licensors to money damages rather than injunctive relief. Many of the costs Molly identifies of enforcing servitudes (particularly underutilization of resources) would become less significant if a potential user knew that injunctive relief were not available. Consider, for instance, Molly’s example of the researchers who reverse-engineer Windows 95. If Microsoft could only obtain money damages, the researchers might not be terribly concerned about the difficulties of obtaining Microsoft’s permission. Limiting IP owners to money damages generally reduces the incentive for potential users to engage in expensive searches to learn whether works are protected, and to learn who owns the associated IP rights ( a point I make in my forthcoming article, Property Rules, Liability Rules, and Uncertainty About Property Rights, 106 Mich L Rev ___ (2008).) Moreover, there is certainly precedent for limiting servitude owners to money damages as a remedy in a variety of cases. (see, for instance, NY RPAPL sec. 1951 (prohibiting award of injunctive relief when servitude is of “no actual and substantial benefit” to the person holding the servitude).
Thanks to Molly for providing such a provocative article!

Stew Sterk

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