Washington Law Review

Article

Super-Statutory Contracting

December 01, 2020 | 95 Wash. L. Rev. 1783

Abstract

The conventional wisdom is that property rules induce more—and more efficient—contracting, and that when faced with rigid property rules, intellectual property owners will contract into more flexible liability rules. A series of recent, private copyright deals show some intellectual property owners doing just the opposite: faced with statutory liability rules, they are contracting for more protection than that dictated by law, something this Article calls “super-statutory contracting”—either by opting for a stronger, more tailored liability rule, or by contracting into property rule protection. Through a series of deal analyses, this Article explores this counterintuitive phenomenon, and updates seminal thinking on property entitlements and private ordering in the intellectual property context.

While law and economics scholars have long grappled with the question of whether and when property rules or liability rules are preferable, they have traditionally ignored a key lever: “perceived control,” or a rights holder’s impression of their ability to grant or withhold permission to use their work, and/or to name their price for such use. In addition to proposing a recalibration of the relative importance of consolidation, transaction costs, defaults, and damages, this Article identifies and describes perceived control as an essential factor in the licensing enterprise. This has significant implications for legislators and policymakers seeking to better align incentives between licensors and licensees, and for administrators tasked with term and rate setting.

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