The Limits of Contract

The law, then, should protect individual rights to one’s body, and to legitimately acquired scarce resources (property). There is not a natural right to ideal objects—to one’s intellectual innovations or creations—but only to scarce resources. Many opponents of IP rights typically support only contractual arrangements to protect ideas and innovations—private contracts between property owners.⁸⁰ Suppose, for example, that A writes a book and sells physical copies of it to numerous purchasers B₁, B₂ ... B_N, with a contractual condition that each buyer B is obligated not to make or sell a copy of the text. Under all theories of contract, any of the buyers B becomes liable to A, at least for damages, if he violates these provisions.⁸¹

But the advocates of the contractual approach to IP are mistaken if they believe that private contract can be used to recreate the same type of protection afforded by modern IP rights. Patent and copyright are good against all third parties, regardless of their consent to a contract. They are real rights that bind everyone, in the same way that my title to a parcel of land binds everyone to respect my property—even if they do not have a contract with me. A contract, by contrast, binds only parties to the contract. It is like private law between the parties.⁸² It does not bind third parties, i.e., those not in “privity” with the original parties.⁸³

Thus, if the book purchaser B relates to third parties T the plot of the purchased novel, these third parties T are not bound, in general, by the original contractual obligation between A and B. If I learn how to adjust my car’s carburetor to double its efficiency, or if I learn of a poem or movie plot someone else has written, why should I have to pretend that I am ignorant of these things, and refrain from acting on this knowledge? I have not obligated myself by contract to the creator. I do not deny that contractual obligations can be implicit or tacit, but there is not even an implicit contract in such situations.

Nor can it be said as a general matter that I have stolen or fraudulently acquired the information, as there are many legitimate ways for individuals to acquire information. Artistic works, by their very nature, typically are made public. Scientific discoveries and innovations likewise can become known beyond the parties to confidentiality agreements. And it certainly cannot be said that my use of my carburetor, or writing a novel using the same plot, physically interferes with the creator’s use of his own tangible property. It does not even prevent the creator from using his own carburetor idea to improve his own car or others’, or from using that plot.

So, my adjusting my carburetor is not a breach of contract; it is not theft; and it is not physical trespass on the inventor’s tangible property. Twiddling my carburetor does not violate the inventor’s rights. At most, my use of this idea will diminish its value to the inventor by hampering his ability to monopolistically exploit it. As we have seen, however, one cannot have a right to the value of one’s property, but only in its physical integrity.⁸⁴

Thus, the use of contract only gets us so far. A book publisher may be able to contractually obligate his purchasers to not copy his book, but he cannot prevent third parties from publishing and selling it, unless some contract prohibits this action.