Tuesday, April 02, 2013

Patent Litigation Seen as a Feud System of Law Enforcement

I am currently working on a book on legal systems very different from ours; interested readers can find the draft webbed for comments on my site. This post is a first cut at something I intend to include in it.

One of the things that has struck me, looking at a wide variety of legal systems past and present, is the important role of feud—often but I think misleadingly referred to as blood feud—as a form of law enforcement. The essential logic of feud is simple: If you wrong me, I threaten to hurt you unless you compensate me for the wrong. It is a decentralized form of law enforcement. In order for it to work, it requires some mechanism that makes my threat of hurting you substantially more believable when you actually have wronged me than when you have not, in order to prevent the enforcement mechanism from being used instead for extortion. To put it differently, you need some mechanism such that right makes might.

For a simple example, consider the feud system of the Rominchal gypsies, the largest gypsy population in England, as described in Chapter 3 of Gypsy Law. If you wrong me, I threaten to beat you up. Both of us know that if you have wronged me, as judged by the norms of our community, my friends will back me and your friends won't back you, making it in your interest to either compensate me or leave town.

Feud systems (not, incidentally, the same thing as feudal systems—the words sound similar but are unconnected in both meaning and origin) are very common among human societies. In addition to the Rominchal, well recorded examples include saga period Iceland and traditional Somali. In the Icelandic case, the mechanism for converting right into might was an explicit law code and a court system. You sued the person who wronged you. If you won, the verdict was a damage payment he owed you. If he failed to pay, he had two weeks to leave Iceland, after which he was an outlaw, meaning that it was legal for you to kill him and tortious for anyone to defend him. The system functioned for about a third of a millenium—for details see the relevant chapter in my draft. The Somali version was somewhere between the Icelandic and the Rominchal, with customary law and customary mechanisms for setting up courts to arbitrate disputes—along with a fascinating system of prefabricated coalitions to deal with both paying damages and enforcing their members' claims.

Perhaps more interesting, there is good evidence that many, perhaps most, legal systems were built on top of preexisting feud systems. That includes Jewish law and Muslim law, both of which contain what I would described as fossilized evidence of a feud system, along with Anglo-American common law and Roman law.

Feud systems are not only a matter of historical interest—de facto, if not de jure, they still exist. One current example is patent litigation among modern high-tech companies such as Apple and Samsung.

Suppose Apple sues Samsung, claiming that Samsung's phones infringe some of Apples' patents.  Doing so costs Apple something, since lawyers have to be paid, but it also produces two benefits. There is some chance that Apple will win, be awarded damages, and be able to some degree to cripple Samsung's product line by refusing to license the relevant patents. And even if it loses, the uncertainty generated by the litigation will to some degree reduce Samsung's ability to compete with the iPhone.

If the legal system worked perfectly, Apple would always lose when its patents were not infringed and would be liable for the costs that its unsuccessful suit imposed on Samsung. But it does not work perfectly. The rights established by patent law are sufficiently fuzzy so that Apple has some chance of winning even when it is in the wrong. And, under most circumstances, if Apple loses it will not be found liable for costs, direct or indirect, that the suit imposed on Samsung.

Part of Samsung's response is to try to win the case in the courts. But the other part is to have or acquire a patent portfolio large enough so that it can plausibly claim that Apple infringes some of its patents, sue, and so impose costs on Apple to retaliate for the costs Apple imposes on it. As best I can tell, this is currently standard practice in the high tech world. Firms acquire portfolios of patents not primarily for their own use but as weapons with which to attack, or threaten to attack, other firms.

What I have just described is a feud system, with litigation taking the place of direct violence. Like other feud systems, its functioning depends on some mechanism making it easier to win when you are in the right, some way of converting right into might. Without that, the threat of suit can be used not to enforce rights but to extort money.

In theory, the court system provides that mechanism by making it easier to win an infringement case when your patents have actually been infringed. Absent the feud mechanism, the courts would have to work well enough so that suing innocent people on average lost money. With the feud mechanism, it is sufficient that suing innocent people and then having them counter sue you on average loses money, while suing guilty people on average makes money, even if they counter sue you—provided you have not really infringed their patents.

Whether this particular feud system works or is broken is a matter people  disagree about. Those who think it is broken describe the people they think are using it for extortion as patent trolls.

Comments welcome. 




11 Comments:

At 5:38 PM, April 02, 2013, Anonymous Joseph said...

I found this extremely interesting. One additional method for "might makes right" can be found in social media. Apple received a lot negative comments for its lawsuit against samsung, especially for some of the more absurd patents which obviously should never have been granted. I think many of these attacks came from people who still support the concept of patents.

I also recall Samsung being interpreted in a heroic light for attacking apple in an advertising campaign later on, its formation and good publicity being a consequence of the patent lawsuit.

Google recently announced this:

http://google-opensource.blogspot.co.uk/2013/03/taking-stand-on-open-source-and-patents.html

As expected, the response on social media is also very positive.

 
At 7:47 PM, April 02, 2013, Anonymous Anonymous said...

Were there trolls in historical feud systems? How were they dealt with?

 
At 8:44 PM, April 02, 2013, Anonymous Douglas Knight said...

What does this have to do with patents? Couldn't you say just as well that all litigation is a feud system?

The only thing specific to patents is that patents are an easy way to build a litigation arsenal and the general beliefs in the tech industry of the patent situation as mutually assured destruction and a reluctance to do patent first strikes (against peers).

 
At 10:41 PM, April 02, 2013, Blogger David Friedman said...

I think my analysis only applies to litigation where each party has a potential threat against the other--not to the case where there are only grounds for a suit in one direction.

 
At 2:10 AM, April 03, 2013, Anonymous Anonymous said...

A patent troll is a company that doesn't itself use any patents. It is therefore outside the "feud system"; it can't be countersued.

 
At 6:36 AM, April 03, 2013, Blogger August said...

Even if you exclude patent trolls, the 'feud system' still costs a ridiculous amount of money, which suggests it only conforms to the feud system in appearance and not in substance. This is a problem that looks like a feud system, not a feud system that actually solves a social problem.
Well, it does solve one problem- a government problem. The government makes lawyers, who grow up and become politicians, so they need pretexts via which they can feed all these lawyers.
Entre vous crappy law that exists solely to provide yet another point at which lawyers get to do their lawyering. I confound both the left and the right by pointing out this is what gay marriage is really about. Those upper middle class homosexuals have money and are the most likely to be foolish enough to take out a contract. Their wealth shall be lawyer food.

 
At 7:18 PM, April 03, 2013, Anonymous Anonymous said...

It sucks for small startups: "I have reason to believe you are violating some of my thousands of patents. Sell yourself to me at a unfair price or spend the rest of your life in court."

 
At 8:38 PM, April 05, 2013, Blogger RJM said...

So if I get you right, you offer a new perspective on how to look on these "patent wars". Naively these patent suits have the purpose of simply resolving patent conflicts.

You mention how high tech firms actually acquire patents as threat. It seems plausible to me to look at that like a feud as you elaborate.

I don't know if every reader of your blog is aware of that oddity (maybe I just state the obvious): Current practice in patent suits might actually provide a mechanism of law enforcement (just like a feud system). The current practice in patent suits, however, does not serve the ascribed purpose of directly (and efficiently) resolving conflicts over patents.

I feel that your blog quite often ignores the ascribed purposes of existing institutions and directly jumps behind the scenes to see how thinks actually are. I find that quite inspiring.

 
At 2:48 PM, April 09, 2013, Anonymous C.Glassey said...

Dear Professor,

Love the blog. Looking forward to seeing the final book. Anytime you want to talk about Chinese culture/poltical systems I'm at your disposal.

Speaking for myself, I'd really have enjoyed a section in the class on old (pre-Empire) Roman law as a comparison to what we have today.

best wishes,

Colin

 
At 9:24 PM, April 10, 2013, Blogger Matewo said...

My instinct for the term Feud System is that a coalitional enforcement structure must play an important part. Not that I have any authority to set definitions.

An analogy for the patent portfolio situation you describe would be the anarchic mutual deterrence system between independent nations. Each nation maintains plans and the ability to attack the other not because they themselves want to initiate an attack (which carries real costs and risks) but to further buttress the costs and risks to the other nation so as to incent the other nation to themselves not initiate an attack.

Okay, that sentence kind of got away from me, but hopefully you see the analogy.

So, I find it odd to call a one-to-one mutual deterrence system a Feud system. The patent situation sounds more like anarchic self-provided defense. (With the possible attendant conclusion that patent law is so broken, companies are just conducting a multi-sided cold war in its ruins)

 
At 1:48 AM, May 03, 2013, Blogger Branden Smith said...

Feuds begin because one party (correctly or incorrectly) perceives itself to have been attacked, insulted or wronged by another. Intense feelings of resentment trigger the initial retribution, which causes the other party to feel equally aggrieved and vengeful. The dispute is subsequently fueled by a long-running cycle of retaliatory violence. This continual cycle of provocation and retaliation makes it extremely difficult to end the feud peacefully.
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