Property Law
Brewbaker, Spring 2011
Course Intro and Fundamentals
I. Property Rights and Economics
a. Ownership Models
i. Private Property
1. right to use
2. right to exclude
ii. Common Property
1. Group members have right to use
2. no right to exclude other group members
iii. State-owned property
1. state controls use and exclusion
b. Externalities
i. Definition: Externalities exist whenever some private property owner makes a decision about how to use resources without taking full account of the effects of the decisions—Externalityàowner must not know of the external benefit/harm
ii. External Cost: Owner’s use imposes costs on others do not enter into his private cost/benefit calculus when land use decisions are made
iii. External Benefits: Owner’s use confers benefits on others that do not enter into his private cost/benefit calculus when land use decisions are made
iv. Assumption: Owners do not consider effects on others unless it pays (economically) to do so
c. Example on External Costs
i. X is considering opening a paper mill that will generate a net profit to X of $500 per year but will impose a total cost of $1000 per year on the surrounding community because of air pollution. Will X open the mill? YES
ii. the use is “inefficient” because it creates a net societal loss.
iii. What would make X not open the mill and therefore not cause “inefficient” land use
iv. Community could pay X between $501 and $999 so that both parties will be better off
d. Example on External Benefit
i. X owns tract of pasture land. He is considering spending $500 to plant trees on the land, but would benefit by only $450 if he does so. However, X’s neighbors use adjoining land for deer hunting and would reap a $75 benefit if X’s open land became wooded. Will X plant the Trees? NO
ii. X’s decision is “inefficient” because a net social gain of $25 is forgone
iii. Is there any possibility that X might plant the trees? Adjoining owners might pay X to do so. At any price between $51 and $74, both parties will be better off.
iv. The “efficient” land use will occur
e. Transaction Costs: Impediments to bargaining by those affected by undesirable land uses
i. Costs of bargaining
ii. Costs of obtaining information
iii. “Collective action problems”
1. Free Riders
2. Holdouts (i.e. developer buy 9 of 10 lots he needs to make development; last owner holds out for large sum)
a. developer could avoid this problem by not making firm commitments until all sellers agree to a favorable price
b. cost of negotiating this could be an impediment
f. Coase Theorem
i. For a long time, economists assumed that regulation was appropriate whenever significant externalities were likely to be present because of “market failure.”
ii. Coase argued that regulation is not always necessary—in the absence of transaction costs, efficient land use would always result because of the capacity of the parties to bargain with each other
iii. Implications:
1. Regulation is never necessary because markets always enable private parties to solve their own problems?
2. Regulation is always necessary because in the real word transaction costs are always present to some degree?
3. Externalities are a function of transaction costs.
4. Both private transactions and regulation are costly
5. Imperfect alternatives
g. Some Reservations about Economics and Law
i. Utilitarian
1. the law aims to discourage trespass
2. society accepts legal protection of property because individuals want that protection their own property
3. Cf. Jacque v. Steenberg Homes, Inc.
4. private property promotes individuality and “healthy diversity”
ii. “Efficiency”
1. Pareto Efficiency
a. “everybody better off and nobody worse off”
2. Kadlor-Hicks efficiency
a. hypothetical bargain meeting Pareto standard is possible, even if not implemented in fact
b. meets Pareto requirements but involves compensation from those worse off to those better off
3. Assumes current distribution of wealth
4. measured by willingness to pay
II. Acquisition of Property by Discovery, Capture, & Creation
a. Acquistion by Capture
i. Wild Animals (Ferae naturae)—Pierson v. Post
1. mere pursuit of animal was inadequate; must possess or capture the animal
2. needs actual possession; trapped, killed, or have mortally wounded the animal
3. Motivation of Court:
a. to eliminate foxes
b. simpler rule to enforce
4. Government has the police power to prevent harm of killing wild animals.
a. notion that government owns wild animals, and therefore has rights over a person who takes possession is fictional
b. i.e. if hunter kills geese against hunting laws because they were destroying his property, government can confiscate the geese.
c. furthermore, hunter does not have claim against government as owners of the geese
ii. Relative Title
1. the right to property is measured in relation to another; the court will adjudicate according to the relative rights of the parties involvedàwill award possession to the prior possessor (“the prior possessor rule”)
2. Constructive possession—a legal fiction that can create a situation where the person who actually possessed the animal first may not have rights to it;
a. example: If trespasser (T) kills fox on owner’s (O) land, O may have rights to animal whether he knows it or not—law creates this legal fiction to discourage trespassing; O has a right to exclude others from his
ian argument: everybody was better off and nobody was worse off (economically, Jacque’s right to exclude was violated)
d. Kaldor-Hicks efficiency? Pay Jacque to move across?
2. State v. Shack
e. New Jersey Supreme Ct. limited right to exclude
f. Union workers could not be excluded from entering to aid migrant farm workers—beyond reach of trespass statute
g. “A man’s right in his real property of course is not absolute.” Cannot use property to injure others.
ii. Property in One’s Ideas & Expressions: General Principles of Intellectual Property
1. Copying and the Common Law
a. General Rule: “In the absence of some recognized right at common law, or under the statutes…a man’s property is limited to the chattels which embody his invention. Others may imitate these at their pleasure”—Cheney Brothers
i. “Imitation is the lifeblood of competition”—Smith v. Chanel, Inc.
ii. to prevent imitation would be to set up a monopoly—Cheney Brothers v. Doris Silk Co. (D copied designs of P after it determined which designs were popular)
b. Unfair Competition
i. Need to protect investment and ideas to stimulate new ideas and investment
ii. INS v. Associated Press
1. held that there was value in the news (quasi-property interest);
2. was misappropriation for INS to disseminate the news before AP could publish—INS could not “reap where it has not sown.”
2. Statutes—Intellectual Property Law
a. Copyright—expression of ideas; not the idea itself; i.e. books, articles, music, artistic work, etc.
b. Patents—protects application through inventions, not abstract ideas; last for 20 years
c. Trademarks—brand logos, etc.; words and symbols indicating the source of a product or service
iii. Property in One’s Persona
1. Right of Publicity
a. Property Interests includes name, likeness, and other aspects of one’s “identity”
b. In White v. Samsung Electronics of America, court held that a depiction of a robot dressed similarly to white in front of a Wheel of Fortune board violated right of White’s right of publicity
i. dissent argued that this overprotected and made it “a tort for advertisers to remind the public of a celebrity” even when no use was made of White’s voice, name, likeness, or signature
