Contract-Based Post-Sale Restrictions on Patented Products Following Quanta

Alfred C. Server and William J. Casey

Volume 64, Issue 3, 561-640

Supreme Court decisions regarding the doctrine of patent exhaustion have drawn a bright line for determining when patent exhaustion occurs. If a sale of a patented product is authorized, exhaustion occurs. If a sale is not authorized, there is no exhaustion and patent remedies remain available to the patent holder to enforce a breach of a contractual restriction placed by the patent holder on the buyer of its patented product. But a lack of precision in the Supreme Court’s patent exhaustion jurisprudence has resulted in uncertainty regarding the scope and impact of patent exhaustion. Specifically, questions persist as to whether a patent holder can preserve its patent infringement remedies by placing a contract-based restriction on a buyer’s use or disposition of its patented product as a condition of the sale of the product and whether breach of contract remedies remain available to a patent holder if an authorized first sale is made and exhaustion occurs.

The Supreme Court’s failure to answer these questions in its latest decision regarding patent exhaustion has prompted the Authors of this Article to seek these answers through a review of the relevant case law, in order to provide guidance to the patent holder who intends to control the use or distribution of its patented product following a sale. On the basis of their review, which involves an analysis of the conflict between federal patent law and state contract law that occurs in the context of an authorized first sale of a patented product, the Authors contend that a patent holder is unable to preserve patent infringement remedies by conditioning the sale of its patented product, and that contractual remedies remain available in many cases even when patent exhaustion occurs. Further, the Authors propose a case-by-case approach to assessing whether a contract-based post-sale restriction on a patented product is enforceable under state contract law. This approach involves determining whether (i) an objective of federal patent law preempts enforcement of the contractual provision; (ii) the inclusion of the provision in a contract constitutes patent misuse; (iii) the provision violates federal antitrust law; and (iv) public policy considerations (that is, regarding public health and safety) militate in favor of enforcing the restriction. The Authors conclude by noting that the distinction between patent remedies and contract remedies has diminished in the wake of the Supreme Court’s recent ruling that the proper test for the granting of an injunction upon a finding of patent infringement is the traditional four-factor test used for non-patent causes of action.

Full Article

Through the Eyes of Jurors: The Use of Schemas in the Application of “Plain Language” Jury Instructions

Sara Gordon

Volume 64, Issue 3, 643-678

“Through the Eyes of Jurors” is the first law journal article to consider all of the major cognitive psychology studies that examine how “schemas,” or the preexisting notions jurors have about the law, shape jurors’ use of jury instructions, even when those jurors are given “plain-language” instructions. This Article examines the social science research on schema theory in order to advance our understanding of how schemas continue to influence jurors’ use of jury instructions, even when those jurors are given “plain language” instructions.

A significant body of legal literature has examined jurors’ use and understanding of jury instructions, and many scholars have recommended methods to improve juror comprehension of instructions. This Article takes that analysis a step further, and argues that even when given “plain-language” jury instructions, jurors will still be influenced by their preconceived ideas of what the “law” is—in other words, by the preexisting schemas they have for legal concepts. Furthermore, these schemas are often legally incorrect, and findings from the social sciences suggest that—even when given plain-language jury instructions with the correct legal standard—jurors may still apply these legally inappropriate schemas. This Article synthesizes the results and underlying theories derived from those findings in order to examine the impact these schemas have on jury decisionmaking, and on jurors’ use of jury instructions, and to identify ways lawyers and judges can counteract inappropriate existing schemas and activate legally appropriate schemas before jurors are introduced to the facts they are expected to interpret. Specifically, courts should use principles of cognitive and educational psychology to develop jurors’ schemas for the applicable legal concepts to make their schemas better organized and therefore more accessible. Such schemas would allow for more thoughtful judgment and better, more accurate decisionmaking.

Full Article

Consenting Under Stress

Hila Keren

Volume 64, Issue 3, 679-738

This Article highlights a disturbing gap between what is currently known about stress across a range of disciplines and the way stress is treated at law. It does so by focusing on parties who seek relief from contractual obligations on the grounds that they consented under stress. The Article first exposes the leading legal view that stress is merely a subjective feeling and therefore merits no legal recognition. It then provides a pragmatic synthesis of the rich study of stress in order to counter that misguided legal presumption and to offer a better understanding of the physical, social, and psychological dimensions of stress.

Exploring both the scientifically accepted causes of stress (stressors) and the known outcomes that result from stress, this Article offers a new framing of stress and a set of analytic tools that allow better legal access to the problem. This Article argues that legal actors can and should use the non-legal scientific understanding of stress to evaluate the arguments of those who claim to have consented to an unwanted contract while under stress. This Article concludes that informed evaluation of stress arguments is not only pragmatically necessary, but also conceptually required for any legal system that, like contract law, relies on the power of choice and consent.

Full Article

Marriage Rights and the Good Life: A Sociological Theory of Marriage and Constitutional Law

Ari Ezra Waldman

Volume 64, Issue 3, 739-780

The national debate over marriage discrimination against gay and lesbian Americans is playing out in state legislatures, at the ballot, and in the federal courts under the conventional notion that liberal rhetoric, the liberal political philosophy indebted to John Rawls, and the unencumbered self at their cores are the bases for the most effective arguments for the gay rights movement. Pro-gay groups talk often about rights, liberty, and the freedom to choose whom to love. Even in court, gay rights groups repeat the Supreme Court’s statements about a fundamental right to make the choice to marry. But the conventional wisdom ignores the important social role marriage plays in society and the way in which the cultural and sociological value of marriage and gay relationships can help jump the constitutional hurdles facing those seeking the freedom to marry.

This is the first in a series of three Articles investigating the underappreciated role that the social theory of Emile Durkheim plays in the quest for the freedom to marry for gay Americans. To that end, this Article begins the discussion by examining the Durkheimian legal arguments that go unnoticed in equal protection and due process claims against marriage discrimination. This Article challenges two assumptions: first, that the most effective legal argument for marriage rights is a purely liberal one, and second, that the substance and rhetoric of liberal toleration cannot exist symbiotically in the marriage discrimination debate with a more robust politics based on the experiential social value of marriage and gay relationships. The freedom to marry is both a liberal right and a piece of the good life. Drawing on Durkheim, this Article discusses a sociological theory of marriage and argues that the constitutional case for the freedom to marry is not just about the rights of equal protection and due process, but also about the sociology of marriage. In other words, a successful constitutional argument depends on the recognition that marriage is a social good with both general and everyday demonstrable benefits for the married couple and society as a whole.

Full Article

Free Speech and Civil Harassment Orders

Aaron H. Caplan

Volume 64, Issue 3, 781-862

Every year, U.S. courts entertain hundreds of thousands of petitions for civil harassment orders, i.e., injunctions issued upon the request of any person against any other person in response to words or behavior deemed harassing. Definitions of “harassment” vary widely, but an often-used statutory formula defines it as “a course of conduct directed at a specific person which seriously alarms, annoys, or harasses the person, and which serves no legitimate purpose.” Civil harassment statutes can protect the safety, privacy, and autonomy of victims, but when courts declare that speech is harassing, or issue injunctions against future speech on grounds that it would harass, they may violate constitutional rules against vagueness, overbreadth, and prior restraint. Unfortunately, civil harassment litigation includes structural features that cause courts to systematically underestimate the free speech dangers.

This Article proposes methods to interpret and apply civil harassment statutes that will avoid most serious free speech problems. The key is to define harassment as unconsented contact or surveillance that endangers safety and privacy. The long-established tort and criminal law concepts of battery, assault, threats, trespass, and intrusion into seclusion lie at the core of this definition. Conduct resembling outrage (intentional infliction of emotional distress) lies at the periphery. Speech about the victim directed to other listeners (especially defamation and malicious prosecution) falls outside the definition altogether. By focusing on the nature of the contact between the parties, rather than on the content of one party’s allegedly harassing speech, courts will be better able to apply civil harassment statutes in a constitutionally acceptable manner.

Full Article

Note – Sustainable Capitalism Through the Benefit Corporation: Enforcing the Procedural Duty of Consideration to Protect Non-Shareholder Interests

Ian Kanig

Volume 64, Issue 3, 863-904

Corporations are beholden to a deeply flawed system of corporate governance known as shareholder wealth maximization. This norm dictates that corporations optimize profits at all costs to compensate equity investors for their continued exposure to risk. Other stakeholders in the corporate enterprise, like employees and consumers, are owed nothing outside of the contractual relationships they might possess, while the public at large is owed nothing at all. Because courts continue to vigorously enforce this norm, corporations are largely excluded from providing public goods and services, while simultaneously incentivized to push harmful production costs onto communities and the environment. To cope with this outcome, disparate actors like non-profit organizations, the state, and consumers have intervened in the marketplace, with questionable effect. While it may be too late to do away with the shareholder wealth maximization system in traditional corporate entities, there is an alternative corporate structure that entrepreneurs and consumers can and should utilize to make capitalism work for the public good.

This Note analyzes how the structure of the benefit corporation reunites profit seeking and the promotion of the public good in a single, private business entity. The benefit corporation mandates a hybrid purpose: profit and “material positive impact on society and the environment.” In short, benefit corporations aspire to the rallying cry of the “social entrepreneur”—to do well while doing good. Critics, however, question the substantive enforcement mechanism of the benefit corporation, a third-party auditing standard that they self-apply to evaluate whether they are effectively providing for the public good. This Note concurs, but proposes a statutory construction and litigation strategy that courts and plaintiffs can apply to ensure that benefit corporations do not shirk their duty to the public. Through the express private right of action known as the “benefit enforcement proceeding,” this Note contends that shareholders and dissenting directors can and should seek injunctive relief for breaches of the procedural “duty of consideration of non-shareholder interests” by the corporation and its board of directors.

Full Article

Note – Fighting Foreclosure: Using Contract Law to Enforce the Home Affordable Modification Program (HAMP)

Arsen Sarapinian

Volume 64, Issue 3, 905-931

In 2009, the Secretary of the Treasury and the Obama Administration unveiled the Making Home Affordable Program (“MHA”) to slow the foreclosure crisis and stabilize the economy. A key component of the MHA is the Home Affordable Modification Program (“HAMP”), a seventy-five billion dollar program designed to incentivize loan servicers to modify loans for certain qualified borrowers. The Treasury estimated that HAMP would permanently modify three to four million mortgages by the end of 2012; however, HAMP has failed to meet its objective.

Under HAMP, if a borrower meets certain criteria, she will be placed on a three-month trial period plan (“TPP”) where she will pay a lowered mortgage payment equal to 31% of her gross monthly income. If the borrower makes this lowered payment for three months and meets other requirements, the servicer should extend a permanent modification with a reduced monthly payment. As written, however, the provision allows servicers to deny permanent modifications even if borrowers successfully meet their reduced mortgage payments.

Recently, borrowers began to bring common law breach of contract claims to enforce the TPP, arguing that the TPP is a binding contract that requires servicers to grant permanent loan modifications. Currently, there is controversy over the validity of the TPP-based breach of contract theory and a split amongst the federal courts. This Note provides an overview of the HAMP application process, examines the controversy and split amongst the federal courts, argues in favor of upholding the theory, and provides recommendations for national legislation.

Full Article