Issue 5

Market Segmentation: The Rise of Nevada as a Liability-Free Jurisdiction

This paper exposes and analyzes the rise of Nevada as an almost liability-free jurisdiction. Contrary to conventional wisdom – that Nevada imitates Delaware law but does not make any profits from competing with it – Nevada has embarked on a lucrative strategy of market segmentation with a differentiated product – a shockingly lax corporate law.

Market segmentation with lax law has allowed Nevada to overcome significant barriers to entry. By tailoring its product to a particular subset of the market, Nevada gained market power in a segment that is not served by Delaware. Nevada’s clear, no-liability law makes Delaware’s competitive advantages less significant and leaves it unable to effectively respond.

Firms may incorporate in Nevada for a variety of reasons that include extracting private benefits, saving on incorporation taxes, and minimizing litigation costs. The data, however, suggest that at least some firms choose Nevada for the first, less benign reason.

Normatively, policy makers should find it worrisome that high agency costs firms, which would benefit the most from regulation, disproportionally choose Nevada’s lax law. Another reason for concern is that Nevada, by creating a competitive pressure towards the bottom, may be dragging Delaware down.

Remote Deletion Technology, License Agreements, and the Distribution of Copyrighted Works

In July 2009 Amazon Kindle users, who had purchased a version of George Orwell’s novel 1984, discovered that this e-book had been removed from their devices. This incident illustrated a new development in the business of distributing copyrighted works: remote deletion technology. Previously, when works were distributed on physical media, once copies were widely disseminated, it was very difficult, if not impossible, to collect these copies if the distribution was later found to be improper. Now, many works are distributed electronically to devices that remain in contact with the distributor. The combination of this communicative link plus the licensing–as opposed to an outright sale-of digital copies allows distributors to maintain control over the content stored on devices of consumers. With remote deletion technology, the entity that controls the device has the ability to achieve instantaneous, inexpensive, and complete recall of previously distributed copies. 

This ability is unprecedented and has the potential to undermine important public interests protected by the Copyright Act. Because of this potential threat, courts likely will be called upon to determine whether license agreements that grant remote deletion powers should be enforced. This Note argues that when there are adequate alternatives to secure permanent ownership of copies of a work–i.e. copies not subject to potential remote deletion–license agreements that grant this power should be respected. When a copyrighted work is distributed exclusively through license agreements that enable remote deletion, however, and there are no alternative means to acquire permanent ownership in this work, courts should find such license agreements preempted by the Copyright Act.

Courts as Diplomats: Encouraging an International Patent Enforcement Treaty Through Extraterritorial Constructions of the Patent Act

Although patent rights confer substantial market control within their territorial scope, globalization is increasingly threatening the value of patent protection. Under the current regime, innovators who enter the global marketplace must obtain patent protection in each jurisdiction where they hope to market their product, and they must litigate infringement claims separately in each of those states. The prohibitive cost of this regime has led many scholars and intellectual property law officials to call for a global patent enforcement treaty, but, despite years of negotiations, all efforts to draft such an agreement have failed.

This Note examines the role that U.S. courts may play in promoting a global patent enforcement treaty. Drawing on an emerging line of statutory interpretation scholarship that encourages courts to rely on default rules that will promote desirable political action, it examines the two primary sources of judicial power in international patent law: extraterritorial application of the Patent Act and supplemental jurisdiction over foreign patent infringement claims. After concluding that a treaty-eliciting interpretive rule is appropriate in the context of a global patent enforcement treaty, the Note contends that a presumption in favor of extraterritoriality for the Patent Act is the more efficient way to provoke discord among the major economic powers and prod the international community to address the needs of innovators in the global economy.

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