Thought Papers/Kevin Hickey Thought Paper

Uncertainty, Use Evolution, and Picker’s Rewind of Sony

Randal Picker, in his article Rewinding Sony,¹ gets a lot of mileage out of hypothetical examples which assign concrete dollar values to the cost of a given design change (say, $5) and the social cost of infringing uses (say, $100). Such examples ignore real-world facts which will make this type of analysis problematic. First, given that infringing uses are likely to be covert, and that proposed design changes will be prospective and theoretical, valuation in an innovative market will be an uncertain and contested inquiry. Second, given this uncertainty, non-expert judges will be assigned the task of sorting between the (often widely-divergent) estimates of the parties to a litigation. Third, and most importantly for my analysis here, such valuations represent the applicable social costs and benefits at only one point in time. The mix of infringing and noninfringing uses to which a device is put will evolve over time; so too will the cost of a design change. In theory, we could factor the future evolution of a device into an expected present value of costs and benefits, weighted probabilistically over all potential paths of evolution; in practice, such an estimate will often be too uncertain to be relied upon.

These valuation problems (and the associated problems of judicial expertise) will be particularly acute in dynamic, innovative markets. One reading of Sony is that, recognizing this uncertainty, courts must give a wide berth to new, mixed-use devices. On this reading, the real problem with Sony is that it does not explicitly limit itself to such situations. For example, assume the potential and actual uses of VCR technology are now stable, and the vast majority of users employ VCRs for librarying and not time-shifting. Presumably the VCR is still “capable of substantial non-infringing uses,” and thus Sony escapes contributory liability; Picker is correct, however, that the social calculus points to the opposite conclusion. But Picker’s alternate test, too, fails to make the critical distinction between still-evolving and stable markets. In other words, Picker seizes upon the potential of networked products to evolve in design, without acknowledging that the uses of such devices evolve—and may do so in a way that makes accurately evaluating social costs impossible. Imposing a continuing duty on networked-device makers for cost-effective design changes indeed makes a good deal of sense, but only if the relevant costs are reasonably easy to evaluate and expected to remain stable over time. Accordingly, Picker’s proposed test should be limited to situations where the mix of infringing and noninfringing uses to which a device is put has become reasonably stable. The rules of evidence may be a helpful way for judges to impose such a rule, as Daubert² requires judges to exclude unreliable scientific evidence. Judges should take a strict view of reliability if they employ a Picker-style test, admitting evidence of social costs only if the device’s market is not emerging and dynamic—thus allowing for evolution in the use of new technological devices.

Notes

1. Randal C. Picker, Rewinding Sony: The Evolving Product, Phoning Home, and the Duty of Ongoing Design, available at http://picker.uchicago.edu/Papers/PickerSony.200.pdf (prepublication draft) (2005).

2. Daubert v. Merrell Dow Pharms., 509 U.S. 579 (1993).