Property Outlaws

By Mike Dorf

Here's a plug for a new book co-authored by my colleague Eduardo Penalver and Fordham law professor Sonia Katyal.  The book is Property Outlaws and its core thesis is that people who violate property rights end up reshaping the law of property, and not just simply by inducing the right-holders to seek enforcement of those rights.  Rather, the argument is that property outlaws change the very nature of property law, often in ways that end up being beneficial to the initial property holders in the first place and society at large.  Here's the official promo:
Property Outlaws puts forth the intriguingly counterintuitive proposition that, in the case of both tangible and intellectual property law, disobedience can often lead to an improvement in legal regulation. The authors argue that in property law there is a tension between the competing demands of stability and dynamism, but its tendency is to become static and fall out of step with the needs of society.

The authors employ wide-ranging examples of the behaviors of “property outlaws”—the trespasser, squatter, pirate, or file-sharer—to show how specific behaviors have induced legal innovation. They also delineate the similarities between the actions of property outlaws in the spheres of tangible and intellectual property. An important conclusion of the book is that a dynamic between the activities of “property outlaws” and legal innovation should be cultivated in order to maintain this avenue of legal reform.
We might expect the Penalver/Katyal thesis to hold true across all areas of legal regulation.  In other words, "outlaws" in general, not just "property outlaws," should shape and improve the law: Disobedience, whether civil or not, can expose gaps between social norms and legal regulation, leading those responsible for the latter to adjust.  But not invariably.  For example, in most U.S. jurisdictions, there is an an unwritten rule that drivers can exceed the speed limit by 5-10 mph without expecting to be ticketed.  Yet that doesn't lead to any change in the law, partly because of the Spinal Tap phenomenon.  ("11 is 1 louder.")  If lawmakers simply raised the speed limit by 5 or 10 mph, drivers would then take that as the new baseline.  In other contexts, widespread lawbreaking signals officials to change enforcement strategies rather than the substantive law itself.  E.g., during gang wars, no one proposes making murder legal.

I would also observe what we might think of as a complementary point: People who exploit loopholes in, but do not break the letter of the law, do not necessarily induce improved legal regulation.  Here I have in mind campaign finance regulation and the taxation of complicated financial transactions (setting aside First Amendment limits on the former).  In both areas, we see a recurring pattern: 1) Congress addresses a problem with a general rule; 2) For a short time, the regulated entities are stymied but then they figure out how to comply with the letter of the rule while still achieving the result they want (and that Congress wishes to forbid)--such as funneling money from influence seekers to politicians or avoiding taxation.  (Tax law has a "substance over form" doctrine to address this phenomenon in general but very good tax lawyers can often game that too); 3) So Congress writes a new law that directly addresses the circumventing transactions, whereupon we go back to step 2).  Lather, rinse, repeat.

In these cases of rule testers rather than rule breakers, regulation does not really get better over time.  In fact, the whole game generates a great deal of wasted activity in the form of evasion and responses to evasion.  Does this mean that evaders never lead to improvements in the law?  No.  There are undoubtedly situations in which it is possible to write an optimal rule but for some reason the lawmaker wrote a sub-optimal one.  In these situations, an evader can highlight the law's flaw and thereby inspire change.  But that strikes me as a less interesting phenomenon than the dynamic Penalver and Katyal identify.