ABSTRACT
Any legal system recognizing property rights or entitlements vested in a particular party or owner must also specify the degree to which the law will protect the owner’s interests. Often, the owner’s interests are protected by ‘property rules’, which, through various civil, equitable and criminal remedies, provide relatively strong protection of the owner’s interests and thereby encourage parties seeking those rights or entitlements to obtain them through voluntary agreements with the owners. At times, however, a legal system may provide a form of protection that permits other parties to obtain the rights or entitlements involuntarily. That form of protection was famously described as ‘liability rules’ in a pathbreaking article by Guido Calabresi and Douglas Melamed.
Describing the rules permitting involuntary transfers of rights as ‘liability rules’ is, however, too restrictive if the concept of a ‘liability rule’ is viewed as permitting an involuntary transfer on the basis of ‘a value determined by some organ of the state’, ‘an objectively determined value’, or an ‘objectively determined price’. Where a legal system permits an involuntary transfer of rights and entitlements from one party to another, the transfer can be more generally described as occurring under a governmentally imposed involuntary contract, which may take the form of a liability rule (permitting the transfer in exchange for an objectively determined value or price) but may take many other forms as well.
Voluntary contractual transfers of property rights often include a complex set of terms, which may include but are not limited to requirements to pay certain sums of money. Involuntary contractual transfers can have the same degree of nuance and complexity. Indeed, this Article finds that at least some governmentally imposed involuntary contracts – especially statutory ‘compulsory licenses’ authorizing involuntary transfers of intellectual property rights – do include important non-monetary terms broadly similar to the terms found in voluntary contracts. This Article argues that, when government entities permit involuntary transfers of property rights, they should consider the full range of terms that could be associated with the transfer of the rights. In that way, involuntary contracts authorizing such transfers can mimic the terms of voluntary agreements that optimize resource allocation and thus serve economic efficiency.
Guan, Taorui, Property Rights and Involuntary Contracting, Tennessee Law Review, volume 88, no 889, 2021.
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