Some product harm is exogenously unknowable until after some consumers have suffered the harm. There is a legal debate over whether such unknowable harm to these early consumers should be given immunity. This article finds that when the seller bears strict liability with compensatory damage on the unknowable harm, the seller's incentive is distorted. There is an incentive to secretly over-test the product, so the seller can drop or attempt to fix a harmful product to reduce the public's detection. At the same time, there is also an incentive to under-test the product to avoid a negative test result being leaked out by a whistle-blower. To achieve the socially optimal outcome under strict liability, the damages on the unknowable harm must be punitive and tailored to the events. Granting immunity for unknowable harm can remove inefficiency without complicated damages. (JEL K13, D83).
As bans on noncompete agreements (NCAs) become more common, commentators increasingly argue that trade secret litigation will rise. The logic is straightforward: banning NCAs increases worker mobility, creating more opportunities for trade secret misappropriation and litigation. We test this claim using state-level NCA bans for high- and low-wage workers and data on trade secret filings from Westlaw and Courthouse News Service. Contrary to this prediction, we find that trade secret filings decline in the long run following NCA bans, even as worker mobility increases. This decline is not driven by fewer cases combining NCA and trade secret claims or by reduced reliance on trade secrecy. Firms appear to rely more heavily on trade secrets after NCA bans. Finally, we find that adoption of the inevitable disclosure doctrine increases both NCA and trade secret claims. These findings suggest that NCA and trade secret litigation are complementary protections for valuable firm knowledge.
We study how the legal profession manages representational conflicts of interest. These conflicts arise when a single law firm represents clients with opposing interests, threatening to undermine the legal process and, ultimately, social welfare. We argue that current ethical standards, emphasizing disqualification, may actually worsen the clients’ situation. Instead, the clients’ interests are today mainly safeguarded by law firms being small, reducing the incidence of conflicts. Despite low market concentration, law firms enjoy high earnings as representational conflicts create negative network externalities at the firm level. These profits are sustained in the long run as entry occurs through firm split-ups.
A prosecutor can offer leniency to an eyewitness in exchange for testimony. There is a concern that allowing the prosecutor to make the leniency contingent upon a successful conviction will produce more perjury and the court has thrown out some testimony obtained through such contingent agreements. This article uses a Bayesian jury model to examine the impact of allowing a conviction-motivated prosecutor to design a contingent scheme. It finds that the impact of allowing contingency on the Type 1 error of innocent conviction and the Type 2 error of wrongful acquittal depends on the precision of the additional evidence in the trial. In particular, when the additional evidence is very precise, allowing contingency may reduce both errors. Under a properly designed limit on the amount of leniency, allowing contingency can reduce both innocent conviction and wrongful acquittal.
This study examines how changes in judicial discretion influence ideological decision-making in the federal courts. Leveraging a pair of unanimous Supreme Court decisions that expanded district judges' discretion to award attorney's fees in patent litigation, we investigate whether this procedural reform led to substantive shifts in outcomes. Our differences-in-differences design reveals that conservative judges became significantly more likely to award fees after 2014 while more liberal ones did not. We observe no similar pattern in copyright cases, which experienced no comparable expansion of discretion. This patent-specific effect is driven by accused infringers seeking fees after defeating patent claims, consistent with conservative preferences for deterring frivolous litigation. Even unanimous, procedurally focused appellate rulings can lead to asymmetric ideological effects. These findings have implications for understanding how changes in discretionary authority-including the Court's recent abandonment of Chevron deference-may systematically empower certain ideological preferences in the federal judiciary.
