Source: https://www.scribd.com/document/277428705/Torts-Innovation
Timestamp: 2018-12-13 11:44:01
Document Index: 22957337

Matched Legal Cases: ['§ 39', '§ 1', '§ 164', '§ 33', '§ 33', '§ 8', '§ 295', '§ 164', '§ 295', '§ 295', '§ 295', '§ 164', '§ 33', '§ 164', '§ 295', '§ 295', '§ 381', '§ 295', '§ 328', '§ 154', '§ 154', '§ 203', '§ 164', '§ 203', '§ 203', '§ 27', '§ 99', '§ 2', '§ 358', '§ 242', '§ 242', '§ 358', '§ 242', '§ 242', '§ 242', '§ 242', '§ 31', 'art. 122', '§ 8']

Torts Innovation | Daubert Standard | Negligence
Torts Innovation
Uploaded by Joana De Castro Gandra
PARCHOMOVSKY & STEIN FINAL PRINT1 B.
Gideon Parchomovsky*
Alex Stein**
This Essay exposes and analyzes a hitherto overlooked cost of tort
law: its adverse effect on innovation. Tort liability for negligence,
defective products, and medical malpractice is determined by reference to custom. We demonstrate that courts’ reliance on custom and
conventional technologies as the benchmark of liability chills innovation and distorts its path. Specifically, recourse to custom taxes
innovators and subsidizes replicators of conventional technologies.
We explore the causes and consequences of this phenomenon and
propose two possible ways to modify tort law in order to make it
more welcoming to innovation.
Introduction ...................................................................................... 286
I. The Central Role of Custom in Tort Law...................... 290
A. Custom and Liability for Negligence................................. 291
B. Custom and Product Liability ........................................... 299
C. Custom and Medical Malpractice ..................................... 300
II. Custom Rules and Incentive to Innovate....................... 303
A. Ex Post Effects ................................................................... 304
B. Ex Ante Effects................................................................... 306
III. Remedying the Anti-Innovation Bias............................... 308
A. Equalizing Down: Doing Away with Custom Rules .......... 309
B. Equalizing Up: Elevating Innovations to the
Status of Custom................................................................ 312
Conclusion ......................................................................................... 314
Professor, University of Pennsylvania Law School; Bar-Ilan University School of Law,
** George W. Crawford Visiting Professor of Law, Yale Law School; Professor of Law,
Cardozo School of Law. We thank Scott Altman, Ian Ayres, Jonathan Barnett, Avi Bell, Peleg Ben
Galim, Eyal Benvenisti, Rick Bierschbach, Bernie Black, Rick Brooks, Paul Campos, Albert Choi,
John Donohue, David Gilo, Assaf Hamdani, Sharon Hannes, Henry Hansmann, Alon Harel, Arthur
Jacobson, Dan Kahan, Ehud Kamar, Gregory Keating, Maggie Lemos, Shmuel Leshem, Yair
Listokin, Bob Litan, Kate Litvak, Jerry Mashaw, Scott Moss, Nick Parrillo, Ariel Porat, Bob Rabin,
Robert Rasmussen, Eliezer Rivlin, Judith Resnik, Pierre Schlag, Peter Schuck, Alan Schwartz, Tony
Sebok, Peter Siegelman, Henry Smith, James Spindler, Stewart Sterk, Kate Stith, Nina Walton,
Mark Weinstein, Phil Weiser, Marianne Wesson, and participants of the workshops at Cardozo Law
School, the Kauffman Foundation Legal Institute, Tel-Aviv University Faculty of Law, University of
Colorado Law School, University of Southern California School of Law, and Yale Law School for
their excellent comments on earlier drafts. We also thank Selina Ellis for outstanding research assistance.
PARCHOMOVSKY & STEIN FINAL PRINT1 B.DOC
[Vol. 107:285
Innovation is a key determinant of wellbeing and economic growth.
Academic discussions of innovation are typically confined to the domains of
patent and trade secret law. This Essay highlights a previously underappre2
ciated connection between innovation and tort law. It seeks to expose and
analyze the cost the current design of our tort system imposes on innovation.
The main thesis of the Essay is that courts’ reliance on customs and conventional technologies as the benchmark for assigning tort liability chills
innovation and distorts its path. This reliance taxes innovators and subsidizes users and replicators of conventional technologies.
The centrality of custom to our torts system can best be seen in three
main doctrines that make up tort law: negligence, product liability, and
medical malpractice. Begin with negligence. In assessing a defendant’s conduct, courts presume that a defendant who fails to comply with safetyrelated customs prevalent in her industry acts negligently. The defendant
consequently needs to rebut this presumption, which may in many cases be
very difficult to do. Likewise, in product liability, courts turn to custom in
determining whether the defendant’s product design was defective. Deviation from industry custom, therefore, runs a greater risk of a ruling that the
product is unsafe. Finally, in the area of medical malpractice, courts hold
doctors to the “customary care” standard. A physician’s failure to comply
with this standard exposes her to a higher prospect of liability.
In short, custom constitutes the benchmark against which defendants’
conduct is evaluated. The law of torts relies on custom not only directly, by
associating custom with precautions against harm that a reasonable person
ought to take, but also indirectly, through evidentiary rules and presumptions that bolster the centrality of custom to adjudicative determinations of
fault. Chief among those rules is the res ipsa loquitur presumption that creates a strong evidential association between safety and conventional
1. See e.g., David Warsh, Knowledge and the Wealth of Nations: A Story of Economic Discovery (2006) (discussing the importance of innovation to economic growth).
2. This neglect is quite surprising considering the classic “rewards insight” of Steven Shavell
& Tanguy van Ypersele, Rewards versus Intellectual Property Rights, 44 J.L. & Econ. 525 (2001).
Shavell and van Ypersele have established that, under certain conditions, paying innovators for their
inventions would promote the incentive to innovate in a socially much better way than giving innovators intellectual property rights. This insight calls for elimination of any negative rewards that
innovators receive from the legal system, and rules of tort liability skewed against innovators constitute a negative reward. See generally Steven Shavell, Foundations of Economic Analysis of
Law 177–99 (2004) (demonstrating how overbroad liability rules chill socially beneficial activities).
4. Courts’ decisions about negligence routinely rely on proxies and evidentiary devices that
include custom, the res ipsa loquitur rule, and accepted expert opinion. See, e.g., Twyman v.
Twyman, 855 S.W.2d 619, 633 (Tex. 1993) (Hecht, J., concurring and dissenting) (“ ‘The issue of
negligence is seldom decided without guidance from some external source: custom, relevant statutes
and regulations, evidentiary doctrines such as res ipsa loquitur, or expert testimony on alternatives.’ ”
(quoting Daniel Givelber, The Right to Minimum Social Decency and the Limits of Evenhandedness:
Intentional Infliction of Emotional Distress by Outrageous Conduct, 82 Colum. L. Rev. 42, 56
(1982))).
precautions against harm. Under this presumption, an unusual occurrence
featuring an infliction of harm by an instrumentality over which the defendant exercised exclusive control prompts an inference that the defendant was
negligent. Taking conventional precautions against harm removes the oc6
currence from the “unusual” category. Failure to take conventional
precautions, in contrast, indicates negligence on the part of the defendant
not only when she takes no precautions whatsoever, but also when she elects
to employ a novel—i.e., unconventional—technology. When res ipsa applies, the case goes to trial automatically and the plaintiff is entitled to a jury
decision on whether the defendant acted negligently, even when she cannot
point to any specific negligent act. The ensuing prospect of losing the case
puts the defendant under a serious pressure to settle.
Another rule inimical to innovation is the Frye doctrine that controls the
admissibility of expert evidence in many state jurisdictions. Under Frye,
expert testimony that falls outside of scientific or technological consensus is
inadmissible as evidence and cannot be presented to fact finders. This evidential incapacitation works against innovators and in favor of users and
producers of conventional technologies.
To appreciate the combined effect of these doctrines and rules on inno11
vation, consider the following example. Assume that Jane, a physician,
invents a new method of stabilizing the heads of patients who suffer back
5. See W. Page Keeton et al., Prosser and Keeton on the Law of Torts § 39, at
243 (5th ed. 1984) (“In its inception the [res ipsa loquitur] principle was nothing more than a reasonable conclusion, from the circumstances of an unusual accident, that it was probably the
defendant’s fault.” (emphasis added)); see also id. at 244–48 (explaining that the res ipsa rule applies predominantly to unusual events).
6. See, e.g., Aderhold v. Lowe’s Home Ctrs., Inc., 643 S.E.2d 811 (Ga. Ct. App. 2007)
(denying res ipsa to a shopper struck by a box that fell from a shelf at a home improvement store).
The court noted that “the manner in which the boxes were stacked . . . did not appear to be unusual
or dangerous.” Id. at 812. For more details see infra notes 47–53 and accompanying text.
7. See, e.g., Hailey v. Otis Elevator Co., 636 A.2d 426, 428 (D.C. 1994) (“Given the power
of res ipsa loquitur to satisfy without further proof the element of negligence and the consequent
caution with which it should be applied, we think that where the plaintiff relies upon ‘common
knowledge’ to invoke the doctrine, the fact that such events do not ‘ordinarily’ occur ‘without negligence’ must be based upon a widespread consensus of a common understanding.” (emphasis
added)). For more details see infra notes 47–53 and accompanying text.
See infra notes 47–50 and accompanying text.
See infra notes 45–46, 57–58 and accompanying text.
10. The Daubert Trilogy, infra note 60, that applies in federal courts and, with some modifications, in more than half of the states attenuates the anti-innovation bias only slightly. See infra text
accompanying notes 62–68.
11. This example is based on a true story one of us heard from a practicing physician. See also
Edward P. Monico et al., The Impact Of Evidence-Based Medicine And Evolving Technology On The
Standard Of Care In Emergency Medicine, 3(2) Internet J. Law, Healthcare & Ethics (2005),
http://www.ispub.com/ostia/index.php?xmlFilePath=journals/ijlhe/vol3n2/evidence.xml (“[T]he customary [care] standard provides a safe haven for physicians who align themselves with the status quo
regardless of whether or not this affiliation reflects the latest medical information. . . . [C]ustom may
contribute to the tremendous delay between discovery of effective therapies and their routine use.”).
As an example of this phenomenon, Monico et al. cite physicians’ general reluctance to perform
ultrasound-guided central venous access—a novel procedure presently depressed by the custom
When an innovator cannot reduce this liability by improving the quality of her innovation. To be sure. see Robert P.g. it is clear that Jane’s method should replace the customary treatment. subsidizes producers and users of conventional technologies while taxing innovators. Naturally.”). the market’s reaction to an innovation is a function not only of the innovation’s quality but also of the innovator’s expected liability in torts.DOC 288 Michigan Law Review 10/20/2008 10:52 AM [Vol. physicians using Jane’s innovative method will be exposed to a much higher risk of liability than physicians who adhere to the customary method. 76 Cal. courts often rely on the commercial success of the invention on the market. Commercial Success and Patent Standards: Economic Perspectives on Innovation. Innovation entails three distinct activities: coming up with a viable idea for a new invention.. we do not argue that tort law stops all innovators dead in their tracks. among other things because it is usually not carried out by innovators. John Deere Co. whereas adopters of Jane’s method will have to compensate the victims in all cases in which the treatment fails. In deciding whether an invention has satisfied the statutory non-obviousness requirement. However. However. and commercialization or marketing the invention to 12 the public. Rev. it is quite possible that users of the customary method will successfully fend off all suits against them. innovators like Jane may decide in many cases to put their inventive skills to rest and forego their attempts to improve upon conventional wisdom altogether. the effect of the law of torts on the incentive to innovate is perverse. Under these rules. might be utilized to give light to the circumstances surrounding the origin of the subject matter sought to be patented. 1. Jane’s method is superior to the customary treatment. which injures five percent of the victims.. From a social standpoint. Second. these inquiries may have relevancy. 842–52 (1988). Merges. research and development (“R&D”). 803. the commercial success of the invention may bear on its patentability. the market success of a new technology determines the innovator’s reward. 383 U. Nevertheless.PARCHOMOVSKY & STEIN FINAL PRINT1 B. 12. For criticism. . The custom-based design of our tort law. As indicia of obviousness or nonobviousness. Anticipating this outcome. especially when coupled with the evidence rules used by courts. failure of others. it is not fail-safe: two percent of the accident victims treated with Jane’s stabilization method will suffer permanent damage to the spine. Assume further that the cost of treating patients is the same under both methods. innovators critically depend on the reaction of the market to their innovation. long felt but unsolved needs. Yet the heightened risk of liability puts a drag on innovation and diverts its path. Failure in the marketplace implies that investments in R&D (and the innovator’s opportunity costs) will not be recuperated. we chose to include the commercialization stage in the inventive process for two reasons. As we will show. First. Unfortunately. e. L. the rules of tort liability will probably prevent this socially beneficial development. Indeed. of Kansas City. Graham v. 107:285 injuries in automobile accidents. We are aware of the possible argument that commercialization is not really part of the inventive process. etc. See. 17–18 (1966) (“Such secondary considerations as commercial success. many innovations are produced even under the current regime. however. successful commercialization directly influences the return from innovation and thus affects the ex ante incentives to innovate. A typical innovator sells her invention to an entrepreneur and exits the scene.S.
the price consumers must pay for new technologies and products that do reach the market. 14. We are aware of the fact that the custom rules produce certain social benefits. it is possible to keep them and grant certain innovations. We term this alternative “equalizing down. even patent their inventions. the increased liability innovators face raises the total cost of producing innovations and. innovators will strive to produce incremental improvements on customary and conventional technologies. may save thousands of lives and alone outweigh the benefits of the custom rules. These benefits are capped. an innovation that substantially improves upon existing alternatives will likely be produced despite the R&D costs. This dynamic will leave society with a list of unimplemented inventions—both patented and unpatented.PARCHOMOVSKY & STEIN FINAL PRINT1 B. however. see also infra notes 116–119 and accompanySee infra Section III. the social value of innovation is virtually limitless. innovators may elect to complete the development stage. On the other hand. we propose a different 14 and arguably more innovative reform: an “equalizing up” approach. We propose two possible reforms that achieve this goal. the custom rules skew the direction of technological progress. Either way. The distortionary effect of the torts system on innovation may be rectified. consequently.DOC November 2008] Torts and Innovation 10/20/2008 10:52 AM 289 The exact effect on innovation is a function of the magnitude of the necessary investment in R&D and the size of the improvement an innovation represents over existing alternatives. approved by special boards of industry experts. we recognize the fact that some may be wary of a wholesale abolition of the custom rules. will stop short of commercializing their inventions because commercialization may lead to liability in torts. Many innovators. The greater the investment in R&D necessary to produce a certain innovation. however: they can never exceed the total social value produced by all tort suits. the same privileged status as enjoyed by custom. Instead of focusing upon genuine technological breakthroughs. By contrast. 13. and when possible. In addition to chilling innovation.B. Instead of abolishing the custom rules. for instance. Nevertheless. however. See infra note 16 and sources cited therein. policymakers can make tort law more welcoming to innovation by eliminating the privileged status of custom and moving to a pure cost-benefit system. When R&D costs are moderate or low. One successful innovation in the area of medicine. First. . ing text. Adherence to custom facilitates fact-finding. For them. because they expect no tort liability at these early stages.” Implementation of this reform will free courts from the need to consider custom in determining defendants’ liability and allow them to compare the defendants’ conduct to other alternatives without putting a thumb on the scale. Adoption of this proposal would require establishing special boards comprised of industry experts. the greater is the risk that the innovation will not be produced. The heightened risk of liability for tort damages induces innovators to limit their R&D endeavors to the conventional technological frameworks. shields defendants from the juries’ whims and biases. 13 and makes tort adjudication more consistent and predictable.
”)..J. only those resulting from behavior 15 that falls short of socially acceptable standards will have this effect.PARCHOMOVSKY & STEIN FINAL PRINT1 B. Jr. Cal. 697. James A. Patrick J.”). 38 UCLA L. § 1. L. 107:285 who will review the safety of scientific and technological innovations in their relevant areas of expertise. at 12 (2000) (describing tort liability as premised on deviation from acceptable standards). 1 (1999). Fleming James. Rev. Rev. 17. Part II discusses the perverse effect of custom rules on innovation. § 164. 38 Clev. 440 (1990) (criticizing California courts’ departure from the generally accepted custom-based ascertainment of product defects for leaving judges and juries “in a vacuum”). Universal Health Care and the Continued Reliance on Custom in Determining Medical Malpractice. Henderson. Stephen R. Part III proposes two possible reforms to eliminate the anti-innovation bias of tort law and analyzes the relative benefits and costs of each. 42 Colum.. Custom’s Proper Role in Strict Products Liability Actions Based on Design Defect. 79 Cornell L. this Essay unfolds in three parts. supra note 5. 16. 1 (1992) (criticizing modern courts’ tendency to place cost-benefit analysis ahead of custom in ascribing liability in torts). 73 S. St. Hooper: The Theory and History of Custom in the Law of Tort.. § 33. in Philosophy and the Law of Torts 72. The Path to The T. Custom and Negligence. In deciding what behavior is socially unacceptable. Creating Safe Social Norms in a Dangerous World. . Jr. 2001) (observing that harms that are actionable in torts result from deviations from a customarily accepted level of risk).J. Implementation of this reform will allow the legal system to unlock much of the value the custom rules currently depress without foregoing the rules’ benefits. L. Perry. Part I demonstrates the centrality of custom rules to the design of our torts system. instead of relying on cost-benefit analysis. Who Decides? Community Safety Conventions at the Heart of Tort Liability. Keeton et al. L. and the Law of Torts. supra note 15. I. Owen. supra note 5. David G. Yet not all harms give rise to liability. at 193–96. 901. 924 (1982) (calling courts’ resort to customary standards “avoidance by delegation”). Custom plays a key role in this process... Particularizing Standards of Conduct in Negligence Trials. Legal Stud. at 193–96. 315.DOC 290 10/20/2008 10:52 AM Michigan Law Review [Vol. 21 J. 5 Vand. 439. Proving Negligence in Modern Products Liability Litigation. § 33. Siliciano. The review process we propose will be optional (rather than mandatory) and private (rather than state controlled). 633. Sigerson. Rev. Structurally. Epstein. Innovations that successfully pass the review will be placed on a par with conventional technologies and will receive the same deference from courts in tort actions. Kelley. & John A. L. Process Constraint in Tort. but instead draw from their diverse array of everyday norms and customs when providing concrete substance to the abstract reasonable person standard to render a decision on the issue of negligence. courts routinely turn to 16 17 custom. 1147 (1942) (underscoring the centrality and utility of courts’ reliance on custom in determining negligence). negligence decisions based on the “reasonable person” standard use customs and community norms as a benchmark). 1003. Rev. 712–13 (1952) (underscoring the centrality and utility of courts’ reliance on custom in determining negligence). Jr. The Jury’s Out: Social Norms’ Misunderstood Role in Negligence Law. But see Richard A. & David K. 353–63 (1990) (arguing that. 1382 (1994) (explaining and analyzing the “customary care” standard for doctor-patient relationships). Risk. 646–47 (2003) (“[J]uries do not engage in [abstract cost-benefit analysis]. David A. 36 Ariz. Steven Hetcher. James A. Urban. Comment. L. Henderson. The Central Role of Custom in Tort Law The law of torts assigns liability for harms individuals inflict on others. See Dan B. St.J. Rev. supra note 5. 67 Cornell L. at 396. 1017 (2004) (“[W]hether a person who has caused harm to another acted or failed to act as similar persons customarily act in the same situation goes to the heart of negligence determinations. 15. See Dobbs. 91 Geo. Steven Hetcher. Responsibility for Outcomes. at 6 (same). Keeton et al. 113–14 (Gerald J. The Law of Torts § 8. Postema ed. A short conclusion follows. See Keeton et al. Rev. L. Rev. Dobbs. Clarence Morris.
Restatement (Second) of Torts § 295A (1965). 20. see also Fed. [W]here there is nothing in the situation or in common experience to lead to the contrary conclusion. a doctor’s compliance with the “customary care” standard is virtually certain to defeat the action. Custom and Liability for Negligence Under general negligence doctrine. there is at least a possible inference that he is conforming to the community standard of reasonable conduct. c.” Accordingly. are factors to be taken into account. . A. a defendant’s compliance with custom substantially increases her chances to defend against negligence and defective-product allegations. . Customs which are entirely reasonable under the ordinary circumstances which give rise to them may become quite unreasonable in the light of a single fact in the particular case. In the Restatement’s words. is not supposed to be dispositive and may be 20 countered by the defendant. . as a practical matter. there is a possible inference that he is not so conforming. . “[i]n determining whether conduct is negligent. at 397. where courts associate defendants’ failure to comply with relevant industry customs with negligence. but are not controlling where a reasonable man 19 would not follow them. in medical malpractice suits. The remainder of this Part analyzes the rules that establish the centrality of custom in the law of torts. § 164. 19. in the area of product liability. Evid. a defendant’s deviation from the relevant industry custom constitutes evidence that she acted negligently. R. In the medical malpractice area. supra note 15. We address both the substantive doctrines of liability and the evidence rules employed by courts. . See Dobbs. . the customs of the community. The Restatement further notes that “[a]ny such custom is . this inference may be so strong as to call for a directed verdict. defendants who comply with custom will likely go scot-free. . Although this finding. 406 (customs and routine practices admissible as evidence to prove action in conformity). on the issue of negligence.” Id. § 295A cmt. on its own. not necessarily conclusive . failure to comply with relevant in18 dustry customs indicates that a defendant acted negligently. Defendants who violate custom are very likely to assume liability in torts. Provision of noncustomary care exposes physicians to a heightened prospect of liability. Restatement (Second) of Torts § 295A cmt. or of others under like circumstances. courts use “customary care” as the standard of care physicians are expected to follow when treating their patients. . Conversely. Finally. .DOC November 2008] 10/20/2008 10:52 AM Torts and Innovation 291 The centrality of custom in our torts system is most readily apparent in negligence cases. The comments to the Restatement clarify the relevance of custom: If the actor does what others do under like circumstances. one way or the other. and if he does not do what others do. courts turn to custom in evaluating the safety of defendants’ products: deviation from industry customs constitutes evidence that the defendant’s product was unsafe. Similarly.PARCHOMOVSKY & STEIN FINAL PRINT1 B. Customary compliance thus separates between two categories of defendants who cause damage to another person. b. noncompliance with 18.
Restatement (Second) of Torts § 295A cmt. ordinarily will go far in proving a plaintiff’s negligence claim. Bowan v. at 193–94.DOC 292 Michigan Law Review 10/20/2008 10:52 AM [Vol.PARCHOMOVSKY & STEIN FINAL PRINT1 B. at 1038 (“A defendant’s violation of a relevant safety standard set . Nutt. 60 F. 407 A. v. Specifically. at 395–96. at 469.2d 606. See Dobbs. especially when the station. Inc. and. Express Med. evidence of the defendant’s failure to comply with the relevant industrial custom allows the judge to give a directed verdict on the issue of 22 negligence. with which the company had conformed. . . 1932).C. reh’g and/or transfer denied (May 13. 1979). supra note 15. . 23. 460 (Mo. A train passenger slips into the gap between the platform and the train and suffers serious injuries to her leg. Id. see also Westinghouse Elec. See id. supra note 16. at 396. . see also Owen. Dobbs. 24.”).2d 464 (D. Courts’ adherence to custom is predicated on the assumption that what is ordinarily done by actors engaged in a similar activity is what an ordinarily 27 careful actor should do under the same circumstances. § 164. 22. indeed. The expert testimony carries no weight when it challenges the customary design of rapid transit systems. the passenger would need to establish that this industrywide custom was unreasonably dangerous. 2004). § 33. 610–12 (D. § 164. The platform’s design is customary. Will the passenger prevail? On these facts. Thus. Cir. used by about three million passengers. 23 Consider the following example. App.W. finally. 29.” The T. Hooper. . 439 A. Defeating a defendant’s evidence of customary compliance is. The plaintiff may overcome custom by showing that 21. Restatement (Second) of Torts § 295A cmt. 1981) (per curiam). 26.. b. supra note 5. b (1965). customs are believed to reflect the conventional assessment of the risks of harm that a given set of circumstances involves. Washington Metropolitan Area Transit Authority. Ct. the actor’s ability to have all this information.2d 737. in the absence of proof to the contrary. See Restatement (Second) of Torts § 295A cmt. 107:285 21 custom often dooms defendants. the feasibility of those precautions relative to alternatives. The passenger sues the company that owns both the train and the station for negligent operation and maintenance of the station. (affirming grant of summary judgment on that basis). the general 28 expectation that he and others will follow the conventional wisdom.C. 28. b.3d 452. Judge Learned Hand observed that “in most cases reasonable prudence is in fact common prudence. 25. 740 (2d. This example is adapted from Sledd v. 2004). Id. see also Bowan ex rel. Transporters.J. To succeed in her lawsuit. supra note 15. She produces expert testimony that the company could enhance the passengers’ safety at a low cost by making the gap narrower than 24 it was. 27. the precautions ordinarily taken to meet those risks. A mere showing of a potentially 25 safer alternative to the custom will not do. 29 extremely difficult. 135 S. had experienced only two similar 26 accidents in the past. Keeton et al. by the defendant’s industry by custom . This practice has an obvious explanation: custom integrates the conventional wisdom—a decisional shortcut which is both easy and sensible to apply without generating much controversy over the court’s decision. Corp.. the answer is no.
therefore. c. 34. supra note 15. that “[w]hat usually is done may be evidence of what ought to be done. The T.2d at 740. 189 U. Because a successful conspiracy showing exposes the entire industry to the risk of class action. See. with40 out making sure that the cars did not move.” The T.g. See Behymer.” and that “in most cases reasonable prudence is in fact common prudence.. See Owens-Corning. Behymer.S.” As attested in The T. . This possibility is rare by definition.E. 189 U. See id. the defendant’s negligence 32 would be established instantaneously. 38.J. Dobbs. e.S.PARCHOMOVSKY & STEIN FINAL PRINT1 B. 2d 483.. 31. 32. v.J. 749 So. 749 So. Hooper. See id. Owens-Corning Fiberglas Corp. whether it usually is complied with or 37 not. 645 N. § 381. This strategy stems from two torts clas35 36 sics: Texas & Pacific Railway Co. 1999) (holding Owens-Corning liable for concealing dangers of asbestos while marketing asbestos-contaminated products). a tugboat caught 30.J. respectively. 2d at 487 (describing extensive cover-up by OwensCorning to avoid liability).S. (noting that courts should disregard a custom resulting from a “deliberate disregard of a known risk”). 468 (1903). evidence of conspiracy is rarely available.2d 737 (2d Cir. See Owens-Corning. 189 U. which made it an easy premise for Justice Holmes’s sharp differentiation between the “is” and the “ought. These decisions established. This Dickensian custom was disturbingly unsafe. 1932). 487 (Fla. Firms make every effort to conceal it as well as to remove any trace of conspiratorial understandings that place the public at 34 risk. 60 F. cost-justified precaution can only be found in rare cases. 39. Hooper presents another setting that one rarely comes across. Hooper. is to identify a readily available precaution against damage that the customary practice had missed. Brakegate. The plaintiff may also demonstrate that the existing custom is a product of collusive un31 derstandings within the industry to which the defendant belongs. but what ought to be done is fixed by a standard of reasonable prudence. 40.DOC November 2008] Torts and Innovation 10/20/2008 10:52 AM 293 the circumstances of the case are so unusual as to make the customary pre30 cautions inappropriate. at 469–70. 749 So. evidence that the industry had missed a 39 readily available. Behymer is one such case. 37. 36. There. 33. See Restatement (Second) of Torts § 295A cmt.J.2d 888 (Ill. If the plaintiff succeeds in proving such a conspiracy. The most promising way of countering the defendant’s custom evidence. There. railroad companies customarily required employees to deice railroad cars while standing on their slippery tops. v. Behymer and The T. Ballard. but strictly it is never its measure. a whole calling may have unduly 38 lagged in the adoption of new and available devices. 1994) (affirming imposition of substantial liability in torts on Owens-Corning Fiberglass Corporation for conspiring with other asbestos manufacturers to conceal hazards of asbestos). at 470. 35. 2d at 485 (stating that the jury assessed thirty-one million dollars in punitive damages against Owens-Corning). and the defendant would likely have 33 to pay punitive damages as well. 60 F. at 1062–63. Ltd. Adcock v. Hooper.
See Frye v.g. Cir.3d 591. at 370–71.2 (Okla. Rev. See Dobbs. . New York. Leahy. and (c) the injury could not ordinarily occur 47 without negligence. For Judge Hand. This notification could have been transmitted by radio without problems. 43. See The T. 2006) (reaffirming Frye’s controlling status in New York law). 1994) (reaffirming applicability of Kelly-Frye standards in California courts and declining to switch to Daubert). . Mobil Oil Corp.Y. See. 138 U. and numerous other states. 1038–39 (1990) (“[F]irms with an earned reputation for safety can enjoy competitive advantages in product and labor markets. 44. 324–31 (Cal. Parker v. Two additional rules of evidence bolster the centrality of custom: the res 44 45 ipsa loquitur presumption. . . See Restatement (Second) of Torts § 328D (1965) (“It may be inferred that harm suffered by the plaintiff is caused by negligence of the defendant when . 41. 1119–20 (N. 47. and the Frye doctrine. 1013. Every modern industry makes a sustained effort to appear safe in order to boost sales and turn its customs and protocols into reliable evidence 43 in courts of law. 65 P.J. e.C. 1014 (D. but the industry’s custom was to allow tugboats to sail with no radio equipment 41 on board. 595 n. 42..2d 321. See. Hooper. supra note 44. Clayton P. 857 N. 882 P.E. (b) the plaintiff’s conduct does not contribute to the occurrence of that damage. Risk.. Gillette & James E. Courts. L. 45. Kelly. Krier. Porat & Stein. 1923) (conditioning the admissibility of expert evidence upon the “standing and scientific recognition” of its underlying scientific knowledge).2d 1240. of course. Tort Liability under Uncertainty 84–100 (2001). 46. which governs the ad46 missibility of expert evidence in numerous jurisdictions. 2003) (listing Frye jurisdictions. 293 F. such self-incriminating industry practices rarely take place. .g. see Ariel Porat & Alex Stein. Nowadays. This dynamic creates a powerful incentive for firms to comply with existing industrial customs and rely upon conventional technologies. Gray. Industries’ conscious effort to adopt and foster customs increases the probability that a firm that aligns with the industrial custom will escape liability for harms it causes. see also Christian v. it also increases the probability that a firm that fails to align with the custom will assume liability for these harms.2d 1114. Id. the event is of a kind which ordinarily does not occur in the absence of negligence . 1244 (Cal. 1027. The res ipsa loquitur rule allows fact finders to hold the defendant negligent when three cumulative conditions are present: (a) the plaintiff’s damage is caused by an agency or instrumentality over which the defendant exercised exclusive control.2d at 740.PARCHOMOVSKY & STEIN FINAL PRINT1 B. The Frye doctrine continues to apply in California.. United States. 1976) (adopting Frye’s general acceptance standard in California law).”). People v. 549 P. 107:285 by a storm had lost a barge it was towing—damage that could easily have been prevented by notifying the boat’s operator about the impending storm. this “slack” was a straightforward affront to 42 common sense. at 84.DOC 294 Michigan Law Review 10/20/2008 10:52 AM [Vol. and undecided jurisdictions). . Daubert jurisdictions. Correspondingly. People v. e. and Agencies. 60 F. § 154. supra note 15. Pa. For specifics and rationales of the res ipsa rule.”).
53. Instead. See Dobbs. Porat & Stein. but two out of three is not enough. Inc. 2003 WL 1948872 *3 (Ky. 229 So. 1968) (approving application of res ipsa in an action for damages resulting from a coal mining company’s blasting operations because the company failed to show alignment with the industry custom with respect to the amount of explosives used). Ct.”). . . Conversely.. In sum. the National Bureau of Standards. 49 courts perceive the damage as practically unavoidable. Inc. Ct. 594 So. the res ipsa rule will likely apply. 556 N. Co. that expert testimony to the effect that the medical community recognizes that an event does not ordinarily occur in the absence of negligence may afford a sufficient basis for the application of the doctrine of res ipsa loquitur. Ct. 533–34 (Ala. App.2d 1220.g. Ins.S. at 88. 51. 435 A. Darlington Corp. e. the defendant will not always avoid the plaintiff’s damage but will always escape the consequences of res ipsa. Coalite. 1158 (N. and the American Society of Mechanical Engineers” and underwent routine inspections in the building)... By doing so. § 154. When. see Rabena v. Kingdom. see also Ex parte Mobile Power and Light Co. supra note 44. supra note 15. 2002-CA-00267-MR. the gap does not classify as unusual and cannot evidence negligence. as in the train-station 52 example. 1223 (Ala. Grossbard. The two other conditions of res ipsa are present. Aldridge. discussed earlier. when the defendant’s instrumentality damages the plaintiff and the customary pre50 cautions are not taken. it induces firms to adhere to customary precautions: taking those precautions negates the condition. 2001) (interpreting the “ordinary” condition of res ipsa as referring to “common knowledge and the experience of mankind” (quoting Khirieh v. For a telling example featuring a plaintiff crying for help. There. Ursini v. 759 (Ala.DOC November 2008] Torts and Innovation 10/20/2008 10:52 AM 295 The final condition refers to courses of events that “common experience 48 of mankind” categorizes as ordinary.E. Buckelew v. See. . .2d 756. City of New York. 861–62 (Ga. the plaintiff has no evidence identifying the specifics of the defendant’s negligence and cannot rely on res ipsa. Nos. See supra notes 23–26 and accompanying text. by taking customary precautions.. 810 So. In the absence of proof that some out of the ordinary event occurred. This means that the negligence presumption extends to cases in which the defendant used novel technology to avoid damage to the plaintiff instead of taking the customary precautions against that damage. Ky. Finch. [res ipsa loquitur] has no application. When customary or “ordinary” precautions do not prevent the plaintiff’s damage.PARCHOMOVSKY & STEIN FINAL PRINT1 B.2d 1150. App. the judge will dismiss the 53 lawsuit. App. 50.”). v. See supra notes 23–28 and accompanying text. 1966) (denying res ipsa to a plaintiff injured by an elevator’s closing doors when evidence showed that “[the elevator] had been installed in accord with the American Standard and Safety Code.g. 48.. Ct. v. 51 The train-station accident. 49. 149 S. State Farm Mut. Because the train company complies with the custom of the rapid transit systems industry. Auto.2d 524. This factor may be crucial to the lawsuit. e. 1990) (dismissing a . the occurrence of that damage is not deemed an event that ordinarily involves negligence on the part of the defendant. 52. 2003) (“[The plaintiff] has failed to show that anything unusual happened during or immediately after the ride. 1981) (“We hold . This condition of res ipsa privileges conventional knowledge over its rivals. the customary status of the gap between the train and the platform denies res ipsa to the passenger whose leg was trapped in the gap. exemplifies how the res ipsa rule works.2d 861. Apr. sponsored by the American Institute of Architects.Y. 1992))).2d 807 (Civ. at 370–71. See. 2002-CA-000560-MR.J. 25. . The res ipsa rule will not apply.
. lawsuit lacking evidence that could identify the wrongdoer or the instrumentality that caused the injury brought by a mother of a mentally retarded child who was taken unharmed on a bus from home to school and returned home with a thigh injury). at B1. Cir. . testimony of a scientific or technological expert can only be admitted into evidence when the expert’s opinion represents knowledge that has gained “standing and scientific recognition” in the relevant 57 community of experts. See id. and the company would be facing a serious 56 risk of liability. Times. the accident would classify as an occurrence that ordinarily involves negligence on the part of the company. Under Frye. But what if the company used a new technology instead of Z-brackets? What if it installed a special control system that keeps the elevator’s doors 55 locked until the cabin’s arrival to the floor? Assume that the probability of this system’s malfunction is roughly similar to that of Z-brackets’ failure. Frye v. supra note 44. 1014 (D. 1923). at 827 (Kenneth S. the plaintiffs would not be able to rely on res ipsa and the company would likely be entitled to a directed verdict in its favor. A person inadvertently leans against an elevator’s closed doors on the tenth floor. and the person falls down the shaft to his death. We made it up for purposes of our example. Under this set of facts. The case would consequently go to the jury. 293 F. United States. Porat & Stein. return to our elevator-accident example and assume that the company calls an expert witness to testify about the advantages of the new control system. 107:285 Now consider the following example of an elevator accident.DOC 296 Michigan Law Review 10/20/2008 10:52 AM [Vol. Just After Similar Death at a Club. as in the train-station case. Feb. substantially reduce the probability of the doors 54 opening. 1013. at 397–98. McCormick on Evidence § 203.Y. 54. This doctrine. 57.PARCHOMOVSKY & STEIN FINAL PRINT1 B. if the expert based her testimony on novel engineering principles. Assume further that the new technological knowledge—explaining how the novel system works and why its malfunction is as improbable as a Z-bracket’s failure—has yet to receive “standing and scientific recognition. supra note 15. too. As explained in 1 Charles Tilford McCormick et al. His descendants sue the building’s maintenance company for wrongful death.” Under the orthodox understanding of Frye. which. according to conventional knowledge. See Dobbs. see Anahad O’Connor & Tanzina Vega. 2006). but the technology used to develop the novel control system is not yet conventional knowledge. This new technology does not actually exist. 56. Queens Elevator Accident Kills 2. at 90.” This requirement disqualifies expert testimony not aligning with conventional wisdom. The second evidence rule that encourages adherence to custom is the Frye doctrine. This is what the res ipsa rule says when Z-brackets are not installed. elevates conventional knowledge over scientific and technological innovations.. To see how. 5. Under this scenario. § 164. Frye’s “general acceptance” standard requires the proponent of an expert’s testimony to “show that the scientific community agrees that the principles or techniques on which the expert relies are capable of producing accurate information and conclusions. The doors open. 2007. N. 6th ed. The company also had installed Z-brackets. Broun ed. at 828 (giving examples of novel scientific findings that “have fallen prey to [Frye’s] influence”). 55. For a newspaper report about the Z-bracket technology. The elevator and its equipment were routinely inspected and found to be in good working condition.C.
Y. A Frye test contemplates that judges need bring little or no knowledge of research methods to the admissibility decision. . 857 N.Y. at 1014 (emphasis added). People v. 509 U. This does not mean. 454 (N. Ortego & James W. Kelly. when properly performed. the court dismissed the plaintiff’s lawsuit summarily. Inc. however.E. .”). 549 P. There. .” (citations omitted)). 976 So. . Federal law and numerous states have replaced the Frye doctrine with a 60 set of rules known as the “Daubert Trilogy. Washington Metro. . Merrell Dow Pharmaceuticals. for example. 137 (1999). . The Admissibility of Novel Scientific Evidence: Frye v. See also David L. the test for admissibility of novel scientific evidence is whether the scientific principle or discovery supporting the evidence is sufficiently established to have gained general acceptance in the particular field in which it belongs.2d 1038. 2001))). 1245 (Cal.C.. 59.J. of the Frye test lies in its essentially conservative nature. 1981) (per curiam). Admissibility Regimes: The “Opinion Rule” and Other Oddities and Exceptions to Scientific Evidence. Gregory. . The Scientific Revolution. Parker v. 80 Colum. 2006) (“[T]he Frye test asks ‘whether the accepted techniques. 522 U. Mobil Oil Corp.S. Sledd v. 2003) (“[I]n applying the Frye rule. 839 A. Products Liability and the Elements of Science: Admissibility of Expert Testimony in New York and Other Frye States. Frito-Lay.3d 262.” This change. Logerquist v. United States a Half Century Later. 293 F. Cases forming this trilogy are Daubert v.” (citations and internal quotation marks omitted)).” Frye.” (citing State v. 36 Sw. This is not the test in Georgia. we have required and continue to require that the proponent of the evidence prove that the methodology an expert used is generally accepted by scientists in the relevant field as a method for arriving at the conclusion the expert will testify to at trial. is a parallel example of an expert’s failure to challenge conventional wisdom. Joseph J. see. Daubert requires judges to have fairly developed empirical sensibilities. v. 1 P.E. 393 S. 579 (1993).’ ” (citation omitted) (quoting People v. v. Rev. For a strict version of Frye. Prac.S. McVey. State.” Paul Giannelli. 21 P. does not 58. L. For a relaxed version of Frye.2d 436. We hold that it is proper for the trial judge to decide whether the procedure or technique in question has reached a scientific stage of verifiable certainty . 147 P. 41 Tort Trial & Ins. In contrast. State v. 2006) (“Washington has adopted the Frye test for evaluating the admissibility of new scientific evidence. 1197. and Common Sense..2d 1114. Grady v. Gore. that the proponent must prove that the scientific community has also generally accepted the expert's conclusion. . The test can be applied simply by counting the noses of members of the pertinent field.2d 1240. Both the scientific theory underlying the evidence and the technique or methodology used to implement it must be generally accepted in the scientific community for evidence to be admissible under Frye. The trilogy substituted the Frye standard by a multifactor balancing test that requires the trial judge (1) to make sure that the methodology underlying the expert’s testimony can .2d 464. or procedures developed by others”). however.. L.S. Wesley. 651 So. . 60. 701–02 (2008) (“Frye-like tests typically focus on whether experts from a particular field accept the empirical basis for the opinion .” (footnotes omitted)).” (quoting Ramirez v. 1994) (emphasis added))). 550 (Fla. see Overton v. 1168 (Fla. Rev. and that court decisions dealing with this issue are not uniform. .3d 113. 133 (Ariz. since they must evaluate the methods and principles underlying the proffered expertise. 1212 (1980). formulae. the company would 59 have no defense against the lawsuit. 136 (1997). L.. . State. 2d 1164. . 1238 (Wash. Area Transit Auth. 1045 (Pa. Faigman. the thing from which the deduction is made must be sufficiently established to have gained general acceptance in the particular field in which it belongs. . U. 633 N. As a consequence. The classic article on the subject attests that “[i]t is unresolved whether the Frye standard requires general acceptance of the scientific technique or of both the underlying principle and the technique applying it. Caldwell v. generate results accepted as reliable within the scientific community generally. Inc. 2007) (“In utilizing the Frye test. Carmichael. This uncertainty originates from Frye’s formulation that “while courts will go a long way in admitting expert testimony deduced from a wellrecognized scientific principle or discovery. 526 U. 1976) (“The primary advantage . 271-72 (Wash. and Kumho Tire Co. 2d 536. For a variety of reasons. 439 A. . id. 83 (2005) (surveying Frye states’ restrictions on the admissibility of novel scientific and technological knowledge). 2000) (explaining that Frye blocks the admission of “novel scientific principles. General Electric Co. 1990) (“In many states. 469 (D. at 1211–14. Frye was deliberately intended to interpose a substantial obstacle to the unrestrained admission of evidence based upon new scientific principles. 1119–20 (N. the burden is on the proponent of the evidence to prove the general acceptance of both the underlying scientific principle and the testing procedures used to apply that principle to the facts of the case at hand.3d 1201.PARCHOMOVSKY & STEIN FINAL PRINT1 B. Weller. 441 (Ga. State.DOC November 2008] 10/20/2008 10:52 AM Torts and Innovation 297 58 the judge should rule it inadmissible. 1995))).2d 451. 699. Joiner.E.
S. 263 JAMA 1438 (1990) (arguing that peer review generally favors conventional wisdom and tends to suppress innovation). The Philosophical Basis of Peer Review and the Suppression of Innovation. One of those criteria.DOC 298 Michigan Law Review 10/20/2008 10:52 AM [Vol. the custom rules tell firms. 509 U. . finally. at 592–95. § 203. Collectively. Daubert. § 203. This criterion is discretionary.S. 65. 67. go conventional. is the expert’s alignment with the conventional technological wisdom. Daubert. Horrobin. David F. Does Frye or Daubert Matter? A Study of Scientific Admissibility Standards. 509 U. A similar timing problem arises in connection with two addi66 tional criteria set by Daubert: replicability of the new methodology and 67 ascertainment of its error rate. Id. For informative discussion of this test. 91 Va. supra note 57. Id. but failure to satisfy it 63 increases the probability that the testimony will be excluded. 68. at 832–33 (describing ways to gain acceptability in the general scientific community). L. peer review is often a wall erected by old-timers that innovators will find difficult 65 to penetrate. that accompanies the expert’s testimony and methodology.” be tested by other experts.. (5) to examine the expert’s inferences from methodology to conclusions for the presence of analytical gaps. Id. and. (4) to see whether this methodology attains acceptance in the relevant scientific or professional community. Apart from that. (3) to take into account the error rate. 64. the new technology usually needs to undergo a long series of tests that will determine its 68 dependability. rather than mandatory. supra note 57. 1 McCormick. (6) to look into the testimony’s capacity to mislead or prejudice the jury. Cheng & Albert H. Another crite64 rion is a peer-reviewed publication of the expert’s methodology. See Edward K. see 1 McCormick et al. Daubert’s multifactor screening of expert testimony includes four criteria 62 that might keep the company’s expert away from court. 471 (2005) (demonstrating empirically. Yoon. 62. actual or potential.PARCHOMOVSKY & STEIN FINAL PRINT1 B. at 593–94. using a jurisdiction-removal criterion for ascertaining tort defendants’ revealed preferences. For these criteria to be met. at 593. 63. This criterion is particularly hostile to technological innovations that are kept secret—away from imitators’ eyes—for business reasons. (2) to consider whether this methodology underwent peer review and was published in the academic or professional literature after undergoing examination for possible flaws. Cf. Rev. “if you want to minimize your prospect of paying for damages that your activities may cause. again. at 594. 107:285 materially affect our analysis: a defendant who chooses to use new technologies over conventional ones would hardly fare better in a Daubert 61 jurisdiction. at 831–33. that the shift from Frye to Daubert has brought about no real changes on the ground in state courts). at 594. align yourself with the custom and never stand out. 66. 61.
75.. 76. Custom and Product Liability 69 Custom also plays a crucial role in the area of product liability. Custom is taken into account in the determination of design defects under both the “risk73 74 utility” and the “consumer expectation” tests. Owen. 2 Madden & Owen on Products Liability § 27. Id. although it does not yet establish that the equipment was unreasonably dangerous to ordinary consumers). 69.DOC November 2008] 10/20/2008 10:52 AM Torts and Innovation 299 B. Note that industrial custom is not exactly the same as the “state of art” upon which manufacturers often rely in defending against product liability lawsuits. supra note 69.. Owen et al. Industry customs affect predominantly products’ designs. See Owen et al. at 7–8. and Alfred v. 5–10 (2004) (documenting massive use of industry customs as a benchmark for determining design defects in product liability actions). Comment. Conversely. See Keeton et al.. § 99. at 823–28. and liability for inadequate instructions and warnings accompanying the product). Whether they do so or not is an empirical question. at 823–28. Id. Proof of Product Defect. See Urban. see Moore ex rel.PARCHOMOVSKY & STEIN FINAL PRINT1 B. Id. Cf. 74. 72 inconclusive—of the presence of a defect in its product. a manufacturer’s failure to conform to custom constitutes evidence—once again. Inc.4.6. The effect of these custom rules is substantial.2d 43.. a product classifies as defective when it creates a risk of harm that exceeds its benefits or falls far below a reasonable consumer’s expectation. See David G. Custom is what manufacturers habitually do in producing the product. For recent court decisions on that issue. Under the prevalent product-liability regime. We therefore do not discuss here actions complaining about manufacturing defects or inadequate instructions and warnings. a manufacturer’s conformity with the 70 relevant industrial custom is admissible as evidence tending to prove that 71 its product was safe and not defectively designed. a product that deviates from customary design will almost certainly fail both the “risk-utility” and the 75 “consumer expectation” tests. at 824–26. See David G. . Conversely. Owen. supra note 73.3d 1083. 71.J. at 823–28 (3rd ed. 72. at 7. A product that conforms to the customary design will normally classify as more beneficial than risky and as satisfying a reasonable consumer’s expectation. Restatement (Third) of Torts: Products Liability § 2 (1998) (specifying three distinct categories of product liability: liability for defectively designed products. at 701. Under these tests. Moore v. 93 Ky. 262 F. 1088 (10th Cir. L. 2000).. 73. State of art refers to a general technological ability to make a safe product. supra note 16. liability for manufacturing defects. 2001) (holding that failure of defendant’s equipment to comply with industry standards evidences presence of a defect in the equipment. 1. supra note 5. Caterpillar. 70. This failure will result in the classification of 76 the product as unsafe and defective. 46–47 (Miss. at 440 n. Mississippi Valley Gas Co. despite the damage consumers may have suffered from using it. The product consequently will be held safe and non-defective. Manufacturers may or may not customarily utilize the state-of-art technology. 863 So. 2003) (defendant’s evidence that its water heater conformed with industry standards defeated suit for hot water burns sustained by plaintiff).
2006) (“A manufacturer cannot defend a product liability action with evidence it met its industry’s customs or standards on safety. 1994) (same). 79. Spec. Ctr. Buell-Wilson v. Grimshaw v. Ltd. . Titus v. 378 (Ct. The doctor-patient relationship 82 best exemplifies this “custom as default” model.2d 429 (Tenn. 126 (Ct. Div. at 631–33. . supra note 16.. at 631–32. § 358. 1980) (same).2d 524 (Md.. . see also Owen. . 1990) (exemplifying the “customary care” standard in the medical malpractice law). See Tunkl v.. 46 Cal.000 damage limitation for substandard treatment that appeared in patient’s informedconsent form).2d 78 (Ky. 46 Cal. § 242. Inc.. 567 A. 82.2d 891. Molzen. supra note 15. Henderson & Siliciano. the doctor must follow the standards accepted by doctors practicing in the same area or 84 specialty.W. 164 (Ct. supra note 15. 81. A doctor’s basic duty is to 83 treat her patients with customary medical care.”). Bethlehem Steel Corp. Dobbs.. For criticism of these rulings. 1969) (same). Regents of Univ. Meiman v. see Urban. 1979) (holding that trade customs cannot be admitted into evidence under the Pennsylvania law of product liability). Sys.DOC 300 Michigan Law Review 10/20/2008 10:52 AM [Vol. at 987. Rptr. . See. Olson v. custom 81 serves as a modifiable contractual default. 609 F. Rptr. Dedely ex rel. see also Holloway v. § 242. Gupta.N.2d 445 (Sup. 3d at 164.Y.2d 163 (Ga. supra note 15. 83. Inc. 1977) (same)..D. [A]dmission of such evidence is reversible error. See Buell-Wilson. supra note 15.. at 987. see. Rptr. see also Tatham v.PARCHOMOVSKY & STEIN FINAL PRINT1 B. They introduce the principles of negligence into liability that purports to be 78 strict on paper. Ctr. e. Ford Motor Co. at 463–65.. Ct.Y.S. . 348. Franklin v. 275 S. 1963) (voiding on public policy grounds an agreement incorporating patient’s waiver of tort suits for treatments falling below the “customary care” standard). See Dobbs.S. 383 P. 914 (W. It should be noted that courts in California and several other jurisdictions have adopted an unmitigated strict liability regime with respect to 79 defective products. Ash v. Dedely v.2d 308 (App. Ct. at 1382. 1979) (stating that custom is inadmissible because defendant’s compliance with custom does not shield him from strict liability for defective products). Ford Motor Co. William Beaumont Hosp. 80. 525 N.. 107:285 Effectively. C.2d 441 (Cal. J. and we therefore use it in Part III as a model for one of our reform proposals.W. Dental Ctr. See id. For that reason.2d 1069. 558 S. 1073 (3d Cir. supra note 69. the “risk-utility” and “consumer expectation” tests institute a 77 fault-based negligence regime for imposing liability for defective products. supra note 16. Comment. Hoke. 1990) (same). 1979) (voiding on public policy grounds a $15. App. App. at 5 (“The admissibility of customary industry standards [in product liability actions] derives from the use of this type of evidence for nearly two centuries in negligence law . 1994) (same). supra note 16. 894–96 (Mich.g. of Cal.C. 444 S.B. Dobbs. e. § 358.. 174 Cal. 617 N.. 1981) (noting that custom is irrelevant to California’s risk-benefit test for design defects and consequently inadmissible as evidence).Supp. they have ruled that evidence of the manufacturer’s compliance with the relevant industrial custom is irrelevant 80 and consequently inadmissible. App. Porubiansky v.g. 564 N. Univ. Emory Univ. Rptr. 84... Ct. Doctors and patients are not free to downscale this “customary 77.. Custom and Medical Malpractice In many relationships between professionals and their clients. at 1382.” (citations omitted)). 78. N. This liability regime does not discourage technological innovation. App.E. See Dobbs. . Ct. Cudnik v. at 633. Kings Highway Hosp..Y. App. see also Henderson & Siliciano. Specifically. § 242. 3d 147. App. 469 F.W. 122. 154 Cal. Rehab.
1998) (holding an experimental-treatment agreement valid upon ascertainment of patient’s informed consent). 1028 (N. supra note 15. Before making such an agreement. Rev. Univ. 89.E. subject to the “clear and convincing proof” requirement for oral agreements to upscale the treatment).g. Baker. Estrada v. 172–79 (2000) (demonstrating that some courts treat doctors’ compliance with medical customs as strong but nondecisive evidence of due care). See Lars Noah. See Moore v... 88. But the default “customary care” standard is not mandatory. Gostin & Peter D. See cases cited supra note 84. Rules controlling medical malpractice cases differ from the general negligence and product-liability regimes in one important respect. § 242. Also note that courts may scrutinize doctors’ customs that determine the level of risk of injury or death to which a doctor may and may not expose her patient. Jr. Sullivan v. however.DOC Torts and Innovation November 2008] 10/20/2008 10:52 AM 301 85 care” standard.g. An agreement that allows a doctor to provide a patient substandard medical care without exposing himself to liability for malpractice 86 contravenes public policy and is therefore invalid. J. 713 A. Peters. 28 Am. 1992) (articulating the “school of thought” rule as a complete defense against medical malpractice allegations). 91.PARCHOMOVSKY & STEIN FINAL PRINT1 B. App. Note that providers of conventional medicine have no parallel obligation to inform patients about available experimental treatments. when a doctor offers an innovative treatment. at 430. Informed Consent and the Elusive Dichotomy Between Standard and Experimental Therapy. By proving her compliance with the relevant customary norm. available at http://ssrn. 163. and criticizing the “informed consent” requirements for experimental-treatment agreements). 361.L. a doctor’s compliance with the relevant custom. 1973) (holding that such undertakings are valid and enforceable. 610 A. See. practice. e. 519 P.1 (2006). 1984) (same). The Quiet Demise of Deference to Custom: Malpractice Law at the Millennium. See.J. the parties are free to go ahead and substitute the custom default with the 89 chosen “upscaled treatment” agreement.2d 240.2d 681. O’Connor. Henderson & Siliciano.E. the doctor therefore does more than simply increase her chances of winning the case. 103 Yale L. at 1382.com/abstract=1109170) (identifying the “doctrinal feedback” dynamic involving overcautious doctors whose excessive precautions against harm cyclically transform into legally binding customs). at 633. See cases cited supra note 84. supra note 87. Jaques. 57 Wash & Lee L. Jacobson. that experimental treatments do not qualify as a “school of thought. 254 (N. Lawrence O. she and her patient can enter into a special “experimental treatment” agreement that would override the custom default and 90 enable the doctor to deliver the treatment to the patient. If a patient wants to purchase an upscaled treatment and a doctor is willing to provide it. she guarantees 88 herself this result.14 (W. cf. Med. 1993) (“The law requires disclosure only of those alternatives . Schuck. however. Gostin & Jacobson. & Med. 989 F.C. Bd. 690 & n. Rethinking Informed Consent. Under these rules. Helling v. 549 S. supra note 15. See generally Peter H. Optics. Philip G. 321 S. 899 (1994) (evaluating the existing requirements for “informed consent”). Va. 87. 1133 (11th Cir. Law and the Health System 430 n. Note.. Dobbs.” Yates v. See Jones v. James Gibson.E.2d 981 (Wash. the doctor must inform the patient about the 91 nature of the new treatment and its conventional alternatives. e. 296 N. See Baird v. See Dobbs. 375 (2002) (specifying.2d 183 (Mass. 365–67. at 633.2d 1019.J. 2008) (unpublished manuscript.2d 1129. or “school of thought” does not merely evidence the delivery of adequate care. 2001). 90. The patient 85. of W. Va. Carey.. § 242. Such 87 compliance is adequate care as a matter of substantive law. of Trs. Similarly.2d 964 (Pa. Am. 86. Ct. supra note 16. 1974). analyzing. Chidester. Doctrinal Feedback and (Un)Reasonable Care (March 14.
thereby sealing the formation of the parties’ special agreement. These requirements give patients a reliable quality assurance with respect to doctors’ work. custom constitutes a default rule around which the parties can contract. 93. 92. at 631–32. the patient can no longer base her lawsuit against the doctor on what does and does not happen “in the ordinary course of events”—the very foundation of res ipsa. Epstein.1(a)(5) (1991))). All the doctor or a medical institution needs to do to get that are ‘generally recognized and accepted by reasonably prudent physicians. Once a valid agreement for receiving treatment that falls outside the ordinary has been entered. § 242. Epstein.’ ” (quoting Ga. 2004) (holding that medical personnel must exercise reasonable care in administering experimental treatments and that a hospital can be held liable for its failure to supervise those who provide such treatments). Code Ann. As a result.E. the pa92 tient can no longer sue the doctor for deviation from the custom.2d 1078. In theory. 87. This contracting mechanism economizes on transaction costs and spares patients from engaging in lengthy and nettlesome discussions about risks and harms.PARCHOMOVSKY & STEIN FINAL PRINT1 B. though. 1 Dist. Res. The experimental treatment still needs to be performed adequately. A special “experimental treatment” agreement between the doctor and the patient not only overcomes the custom default but also precludes the applicability of the res ipsa rule in its custom-driven format. considering the existing regulatory 94 and self-regulatory requirements with which doctors must comply. She would only be able to make malpractice allegations about the way in which the doctor actually delivered the special treatment. B. The doctor and the patient are not strangers to each other. then. The parties’ agreement would trump the custom. § 31-9-6. 1084–85 (Ill. patients normally agree to receive the customary treatment without negotiating it expressly.DOC 302 Michigan Law Review 10/20/2008 10:52 AM [Vol. See Richard A. of Chi.. The custom-driven doctrines of Frye and Daubert would not block their testimony. Based on this assurance. J. supra note 15. Medical Malpractice: The Case for Contract.. 1976 Am. e. Richard A. The rationale of these rules is two-fold. Found. Univ. The signing of an “experimental treatment” agreement bars the patient from complaining against the treatment’s unconventional nature. The custom default here mirrors what doctors and patients typically agree to. Mortal Peril: Our Inalienable Right to Health Care? 6–8 (1997). the doctor and the patient therefore can determine the treatment that best suits the patient’s needs (and ability to pay for the treatment). in the context of medical malpractice. Medical experts testifying for both sides consequently would have to focus on the new treatment’s nature and benefits. The evidentiary requirements that control the admission of expert testimony are similarly adjusted. 808 N. See. App. See Dobbs.g. custom’s chilling effect on medical innovations is much smaller than in the other areas we discussed. Subject to the public-policy ban of substandard care. . Lenahan v. Failure to do so would expose the doctor to liability for malpractice. 94. Their relationship is formed by mutual contrac93 tual undertakings that can be—and often are—expressly negotiated. 107:285 must then give her consent to the treatment. After granting her informed consent.
Morgan v. Moore. e. 17 Mass. In practice. at 365.2d at 1133.PARCHOMOVSKY & STEIN FINAL PRINT1 B. Naturally. 989 F. App. Securing the patient’s consent to an experimental treatment may therefore become challenging. Apart from that. custom rules protect firms and individuals that rely on conventional knowledge and technologies from liability in torts. doctors need to inform the patient about the conventional alternatives to the proposed treatment. Darke v. App. Jaques.g. 2004). MacPhail. Ct. See. Some courts even require doctors to reveal to the patient their success rate with the experimental treatment. E.E.26 (Ariz. however. informed consent needs to be obtained only with respect to invasive treatments. supra note 88. in fact.C. This expanded ability originates from the courts’ requirement that doctors tell patients that the treatment is experimental. There.2d 326. Noah. Attempts to contract around the default of customary care raise costs both ex ante and ex post for doctors and medical institutions—and the combined increase might.. This extra cost seems quite minimal. overcoming custom is a much more difficult and costly task than it initially appears. The contractual “custom default” therefore only imposes on doctors and medical institutions the extra cost of obtaining informed consent from the patient. a requirement that sharply contrasts with the rule that expressly exempts conventional doctors from the duty to inform the patient about the experimental alternatives to their proposed treatment. We first examine the ex post effects of custom rules on innovation and social welfare and then turn to the ex ante effects. Some jurisdictions base informed consent actions on the torts of assault and battery. 254–55 (N. This Part carries out a detailed examination of the effect of these rules on the incentive to innovate. Ct. supra note 91. Courts also have underscored doctors’ financial and career benefits from delivering experimental treatments as a reason for subjecting the patient’s agreement to undergo such a treatment to heightened scrutiny.DOC November 2008] 10/20/2008 10:52 AM Torts and Innovation 303 around custom is to label innovative procedures (or devices) “experimental” and secure the informed consent of the patient to the treatment. Rptr.g.”). 588 P. Super. Noah. 704 A. given that virtually any medical treat95 ment already requires informed consent. the “experimental” label makes the agreement more susceptible to judicial intervention and invalidation.2d 240. 619–20 (Pa. 689 (Mass. 1997). 96. common procedure is contemplated. as opposed to treatments that are merely therapeutic.2d at 255.. These chilling effects will likely be exacerbated by the “doctrinal feedback” dynamic identified by Gibson. Estrada. Gaston v. Estate of Isner. 321 S. 1984) (summarizing case law from several jurisdictions and interpreting patients’ right to informed consent to include the entitlement to a full “experimental treatment” warning). Ex post.2d 617.. Custom Rules and Incentive to Innovate As we showed in Part I. that its risks and benefits are unknown. the need to label the new treatment “experimental” is likely to frighten away some patients by undermining their confidence in the treatment. Ct. the individual physician’s experience and ‘track record’ would seem even more important than when an established. II. 351 n. e.g. .E. Hunter. at 366. supra note 91. 321 S. the willingness of the courts to review agreements concerning “experimental treatment” strengthens patients’ motivation to disregard their consent to the treatment and sue physicians in spite of the agreement. Ex ante. 1978) (“In the case of a new or unusual procedure. L. be quite substantial. The unusual character of the treatment is likely to induce courts to scrutinize the doctor-patient agreement more closely and expand the patient’s ability to 96 sue the doctor. See Estrada v. By “ex 95. and that they have little or no experience with the treatment.
the new technology will not be adopted. In this case. however. Tort liability for providers of hoist-maintenance services is determined by the general negligence doctrine. The old and the new technology are equally prone to accidents. This. of course. the new technology will be adopted only if it generates sufficiently large operational . Imagine that N’s technology reduces the probability of accidents by 50%. N is not the only provider on the market for hoist-maintenance services. O therefore adds only $10 to his basic price and charges $110 per hoist. Under these assumptions. N can provide the new maintenance service at $80 per hoist. As a result. knows that his expected liability for tort damages is minimal. Both outcomes are inefficient and detrimental to society. The doctrine also applies all other custom rules. assume that the conventional technology causes ten accidents per year and the new technology causes only five. Her competitor is O. By “ex ante effects” we refer to the effects of custom rules on the production and design of innovations. N would either abandon her technology or undersupply the service. is the socially efficient outcome. But the custom rules tax N and subsidize O. As long as the expected cost from the increased liability is greater than the expected cost-saving from the decline in the probability of accidents. O. Assume further that if the operator is held negligent. Importantly. Absent liability for accidents. while adopters of the new technology will always lose. Under a no-liability assumption. Innovator N develops a new technology for maintaining electric hoists.PARCHOMOVSKY & STEIN FINAL PRINT1 B. 107:285 post effects” we refer to the effects of custom rules on the market reception of innovations that have been produced. the analysis changes dramatically. over time N will drive O out of the market and the new technology will replace the old. A. O can provide the maintenance service at a price of $100 per hoist. adopters of the customary technology will prevail in 90% of the negligence suits against them. in contrast. Under current negligence regime. Finally. Realizing her heightened risk of liability. Ex Post Effects We illustrate the ex post effects of the custom rules on innovation by discussing a simple example. Absent liability for accidents. For simplicity’s sake. and so her final price is $130. Will it win over the conventional technology? Not necessarily. the same result will obtain even in cases where the new technology is actually safer and is likely to reduce the rate of accidents. O is far less likely to be held negligent than N. The new technology is as safe as but more costeffective than the dominant technology on the market. This doctrine holds that a provider must make a reasonable professional effort to avoid accidents and uses the existing industry custom as a benchmark.000 per accident. N adds $50 to what she would otherwise charge per hoist. They help O defeat most lawsuits and expose N to an increased prospect of liability for accidents.DOC 304 Michigan Law Review 10/20/2008 10:52 AM [Vol. the average damage award is $100. assume that due to the liability regime we discussed. who provides a similar service using the old and conventional technology.
See supra text accompanying notes 54–56. which means that the number of ophthalmologists willing to use the new lens must be very high. on the other. 98. The higher transaction costs put the innovation-seeking doctors at a disadvantage vis-à-vis their more conservative peers.000 per year. if the manufacturer had instead chosen to install a new control system in its elevators. Will M succeed in introducing her innovative lenses to the market? The answer is unclear. This device substantially reduces the risk of eye inflammation and infection relative to existing lenses. if the manufacturer had installed conventional Z-brackets. at its expense. To make a profit. imagine manufacturer M who develops a new intra-ocular lens for surgical implantation in the eyes of people suffering from cataracts. The existing rules of “informed consent” impose special burdens on doctors who decide to adopt the new lens. like many other innovative products. Anticipating this. A similar anti-innovation bias exists in the area of product liability. the difference between negligence and product liability. To il97 lustrate. See supra notes 73–78 and accompanying text. let’s revisit the elevator-accident example. not kind.” However. the new technology will be adopted only if it reduces operation costs by $400. There. M needs to sell a very large number of new lenses. M contemplates organizing. While the effect of medical malpractice rules on innovation is more nuanced. and medical malpractice.DOC November 2008] Torts and Innovation 10/20/2008 10:52 AM 305 cost-savings to offset the expected payouts to plaintiffs. it would have defeated the defective design claim because the technology would pass the prevalent doctrinal tests for “risk98 utility” and “consumer expectation. Otherwise. the doctors are required to disclose to patients the benefit they received from M in the form of the free special training and reveal their motivation to use M’s lens. they too discourage innovation. M’s lenses. . As we will show. These doctors must notify their patients about the lens’s “experimental” status and tell each patient that the procedure’s risks and benefits are as yet unknown. The resulting decrease of social welfare is apparent. many doctors may decide not to order M’s innovative lenses. is one of degree. a special training course for ophthalmologists to induce them to adopt the new technology. the probability of losing the case under both “risk-utility” and “consumer expectation” standards would increase exponentially. the plaintiffs could also sue the elevator’s manufacturer on the ground that the elevator’s design was defective. The disclosure requirements the law places on the doctors will likely drive some patients away. because the latter need not incur the cost of securing their patients’ special consent to experimental treatment. Under that scenario. To see this. at the end of the day. In our case. 97. These disclosure requirements raise transaction costs for doctors who wish to implement the new technology. Moreover. This means that M’s lenses will succeed in the market only if the medical benefits they generate are significant enough to compensate doctors for the increase in the negotiation and litigation costs they stand to incur if they offer them. The project’s profitability crucially depends on economies of scale.PARCHOMOVSKY & STEIN FINAL PRINT1 B. on the one hand. Accordingly.
In cases where demand is elastic. innovators who will not be able to pass enough of the extra cost to consumers may simply choose to forego the innovation altogether. . 398 (2005). Yet. the use of custom in the torts system increases the cost of commercializing innovations after their development. producers will have to bear the extra cost of the increased legal liability. it is not surprising that even patented inventions are of relatively little value before their successful commercialization. We now turn to discuss this possibility. to operationalize it). however. While all three stages are important. B. firms may elect to forego the development of new technologies altogether. that all innovation will come to a halt. The effect of all this on social welfare is. The ex ante effects of an innovator’s heightened risk of liability are even more significant. of course. as is the case with life-saving innovations. the pro-status-quo bias of tort law impedes the introduction and adoption of new technologies. The development stage encompasses the research and labor necessary to transform the idea into a patentable application (i. the commerciali99 zation stage requires marketing the invention to the public. representing the genesis of the inventive process.PARCHOMOVSKY & STEIN FINAL PRINT1 B. We do not argue. of course. entails coming up with a viable idea for a new invention. Finally. 84 Tex. In some cases. From an ex post perspective. and (iii) commercialization. 395. A Marketplace for Ideas?. the extra cost will be borne by consumers and the innovation will be produced. Ex Ante Effects The analysis so far has taken an ex post perspective. Hence. Failure to win over consumers implies that investments in R&D will not be recuperated. The distribution of the extra cost between producers and consumers will naturally depend on the elasticity of demand. The success of new technologies determines the innovators’ reward. L. When demand is highly inelastic. We examined the interactions that follow an innovation’s development and identified their welfare-reducing effects. Rev. this risk may prevent development of new technologies ab initio. Aware of this bias.DOC 306 Michigan Law Review 10/20/2008 10:52 AM [Vol. In such cases.e.. the commercialization stage has the greatest effect on innovators. Innovation involves three distinct stages: (i) conception. The precise effect of tort liability on innovation depends on the relevant R&D costs innovators must incur to produce new technologies and the superiority 99. (ii) development. Oren Bar-Gill & Gideon Parchomovsky. The conception stage. some inventors may decide that it is not worth their while to pursue innovative technologies and will invest their resources elsewhere. Realizing that the market may refuse to adopt new technologies for fear of the increased liability associated with them. 107:285 will be spurned by doctors. negative.
The study identifies no negative correlation between low to moderate liability payouts 105 and the firms’ innovative activities. 2222 (2000). Moore. however. One Hundred Years of Solicitude: Intellectual Property Law. This alternative is privately cheaper but socially costlier than investing in safety-focused R&D. Id. 1900–2000. The anticipated payout to tort plaintiffs. this erosion may forestall the innovation completely. however. Product Liability. As we explain in the text. Barton. the remaining 101 ninety-five percent lay fallow. Rev. For high liability payouts. 1 (2005). W. Research and Development. Mark Geistfeld. Id. and Innovation. 58 Fla. Id. it likely contributes to this phenomenon. 95 Nw. at 278–80. L. Barton claims that tort liability spurs innovation and uses anecdotal evidence of playground designs to substantiate this claim. 100. Pol. Similarly. Id. Rev. An innovator will consider carrying out her idea when her expected profit is greater than the costs of R&D. see Gideon Parchomovsky & R. 2187. 104 innovation only at very high levels of expected liability payouts. 151 (1994).. at 169–72. Econ. 363 (Boudewijn Bouckaert & Gerrit De Geest eds. 2000). Rational Ignorance at the Patent Office. See id. and Robert P. 88 Cal. 1507 (2001) (“[T]he total [estimated] number of patents litigated or licensed for a royalty (as opposed to a cross-license) is on the order of five percent of issued patents. however. Lemley.PARCHOMOVSKY & STEIN FINAL PRINT1 B. at 164. For discussions of this study. thereby eroding her incentive to innovate. in Product Liability and Innovation: Managing Risk in an Uncertain Environment 151. In others. 1495. See Mark A. 174. 161 (1993). L. Polk Wagner. Innovation. it 106 does find a strong negative correlation. Rev. Patent scholars have noted that less than five percent of patented inventions are of any value. see Susan Rose-Ackerman. 103. 174. Benjamin H. 106. Rev. at 164–66. This finding proves that high levels 107 of product liability depress innovation. The study associates those payouts with the premiums firms paid insurers to obtain product liability coverage. 105. Products Liability. U. He too fails to acknowledge the perverse effects of the custom rules. and Playground Design. L. As we explain in the text. . Pa. Id. which makes it welfareenhancing. 154 U. Patent Portfolios.DOC November 2008] 10/20/2008 10:52 AM Torts and Innovation 307 100 of the results over conventional alternatives. It measures the intensity of the firms’ efforts to innovate by associating it with the firms’ expenditures on R&D. 182. Tort Reform. Barton. responsible for the large number of inventions 102 that are never put to commercial use. Product Safety Regulation and the Law of Torts. which lays out a general economic account of strategic patenting. custom rules give manufacturers a more attractive alternative: replication of conventional technologies. always adds to the innovator’s costs. supra note 100. 102. While we clearly do not claim that the anti-innovation bias of our torts system is solely. 101 J. Kip Viscusi and Michael Moore’s leading empirical study of the effects of product liability on technological innovations partially bears out our pre103 The study’s main finding is that product liability chills dictions. 265 (2006). Professor Benjamin H. at 164–66. 104. In some cases. Cf. For discussion of the factors that account for this phenomenon. it induces the innovator to develop and patent the innovation but stop short of commercializing it because of increased tort liability. in 3 Encyclopedia of Law and Economics 347. Merges. failing to yield any return to the inventors. which discusses patenting aimed solely at blocking competition. or even mostly. Professor Geistfeld argues that product liability motivates the development of novel safety technologies.”). those rules subsidize innovations falling within the accepted technological paradigm (as seems to be the case with Professor Barton’s playgrounds) and tax paradigm-shifters. Kip Viscusi & Michael J. 107. 101. L.
” An alternative way would be to retain the current deference to industry custom but grant certain innovations. Finally. Litan eds. nonetheless. Indeed. the dynamic efficiency loss occasioned by the custom rules may be far greater than it seems. We term this alternative “equalizing up. the study does not account for custom rules’ distortionary effect on innovation. By focusing exclusively on firms’ liability payouts. but ultimately leave open. the firm’s R&D investment would not be indicative of any scientific or technological advancement whatsoever. Instead. 1991). we discuss the two alternatives and assess their respective strengths and weaknesses. the firm may confine its R&D activities to conventional technological frameworks. in some cases. and 108 methodology. .” In the remainder of this Part. the custom rules deprive society not only of those particular inventions but also of many subsequent innovations. Under this scenario. the firm may patent its novel technologies without transforming them into products. the question whether product liability chills innovation. with new inventions building on preexisting ones. III. By preventing certain inventions from ever being produced. Alternatively. it should be noted that. 108. a firm may even increase its investment in R&D in order to develop “liability-proof” products that align with industrial customs. we explore ways to correct this distortion. since innovation in many technological areas is cumulative. Policymakers can reform tort law in one of two ways to make it more welcoming to innovation. 107:285 Viscusi and Moore’s study is most impressive in its scope. Staying within the conventional framework will allow a firm not only to avoid the doctrinal tax imposed on non-conventional innovators but also to do better by accepting the law’s subsidy for improvements of customary technologies. whose safety was confirmed by a special board of experts in each industry. For these reasons. A firm’s expectation of high-liability payouts will not necessarily induce it simply to cut back on R&D. Remedying the Anti-Innovation Bias The discussion so far established the prevalence of custom rules in our torts system and demonstrated their adverse effect on innovation. prompting firms to develop products with low liability prospects despite the feasibility of technologically superior and safer alternatives.. the same privileged status as enjoyed by custom. just in order to block competitors. We term this alternative “equalizing down. model. They will. divert the path of those activities. that the reported findings do not capture the full effect of tort liability—or even product liability alone—on innovation. a collection of essays that examine empirically. The first way to level the playfield is to eliminate the privileged status of custom and switch to a pure cost-benefit system. In this Part.PARCHOMOVSKY & STEIN FINAL PRINT1 B. Huber & Robert E. The custom rules do not always chill a firm’s innovative activities completely.DOC 308 Michigan Law Review 10/20/2008 10:52 AM [Vol. Additional studies can be found in The Liability Maze: The Impact of Liability Law on Safety and Innovation (Peter W. We believe. a firm’s investment in R&D is not a dependable criterion for measuring the effects of tort liability on innovation.
See Noah. 1133 (11th Cir. We now turn to explaining how this proposal can be implemented in each of the areas we discussed: medical malpractice. We wholeheartedly believe that the legal system is right to rectify the informational disparity between patients and doctors by setting forth elaborate requirements for “informed consent. 463. To enable fair competition among firms. U. Miller & Charles Weijer. Twerski & Neil B. L. Fiduciary Obligation in Clinical Research. In the area of medical malpractice. 1993) (noting that doctors need not inform patients about experimental treatments). Hall. if a doctor must disclose her personal interest in delivering the chosen treatment. 55 Stan.W. Moore v. Rev. 112. product liability.” but also when it is conven109 tional. Medicine.2d 495 (Wis.2d 1129. Finally. Kokemoor. 1 (1999) (advocating general disclosure of doctors’ success rates). if a potential recipient of an innovative treatment needs to be aware of the treat111 ment’s conventional alternatives. Equalizing Down: Doing Away with Custom Rules Firms’ rewards ought to be based on the costs and benefits their activities produce rather than on the extent of their compliance with customs.DOC November 2008] 10/20/2008 10:52 AM Torts and Innovation 309 A. the legal system should eliminate the evidential association between innovations and an increased risk of harm as well as abolish the rules that link safety to compliance with custom. Adler v. The most straightforward way of accomplishing this would be to shift to a pure costbenefit system that gives no deference to custom. we propose that liability should be left to contractual agreements between physicians and patients—as is the case today. and negligence. 989 F. this information should be given to the patient not only when the procedure is innovative and “experimental. 487–97 (2002) (describing trust as a foundation of doctor-patient relationship). 545 N.” instead of one uniform standard. patients receiving conventional medicine 112 should then be informed about alternative options.”). They should not be required to indiscriminately attach the “unknown” label to all risks and benefits associated with innovative 109. Med. and Trust. at 366 (“[P]hysicians generally must disclose reasonable alternative courses of action to the patient.” But it went awry in developing two different standards of “informed consent. Baker. Cf. Cf. See Mark A. . 111. 1996) (holding that a doctor’s failure to disclose his success rates to patient violated “informed consent”). supra note 91. all doctors must give the patient correct information about the treatment’s risks and benefits. Law. the legal system should not impose special burdens on innovators in the form of an increased prospect of liability in torts. the doctor’s duty should not depend on 110 whether the treatment is conventional or “experimental. Firms that produce the greatest benefits and least damage should prevail in the marketplace. To this end. 110.L. Paul B.PARCHOMOVSKY & STEIN FINAL PRINT1 B. 94 Nw.” Similarly. Likewise. Rev. the “informed consent” standards for conventional and innovative treatments should be the same across the board. nor should it subsidize replicators of conventional technologies by decreasing their prospect of liability. 34 J. Johnson ex rel. Cohen. If a patient needs to know her doctor’s rate of success in performing a particular procedure. In other words. & Ethics 424 (2006) (outlining doctors’ general obligation to inform patients about conflicts of interest). The Second Revolution in Informed Consent: Comparing Physicians to Each Other. Aaron D. L.
Courts should deem industry customs irrelevant. See Noah. not presumed. she ought to produce evidence that substantiates this claim. In cases where some precautions were taken. The rule’s “ordinary course of events” criterion associates negligence with any case in which the defendant causes damage to the plaintiff. no presumption of negligence should attach to innovative precautions that depart from custom. The defendant would be held negligent and responsible for the damage caused when the risk to which he exposed the plaintiff required greater precautions than he actually took. supra note 91. courts would hold a product’s design defective when the risk of harm for an average consumer exceeded the product’s benefits. To allow innovators to rebut accusations of wrongdoing. Defendants who take conventional or customary precautions sidestep this evidential association. The res ipsa rule should undergo a similar adjustment. industry customs should neither be admitted as evidence in negligence cases. We propose to eliminate this distortion with a new rule that would attach a presumption of negligence only to cases featuring no precautions against damage whatsoever. In the product liability area. rules controlling the admission of expert testimony—both Frye and Daubert—should remove all their restrictions on novel science and technology.DOC 310 Michigan Law Review 10/20/2008 10:52 AM [Vol. Defendants who use novel technology to avoid damage remain subject to the res ipsa rule and are consequently treated similarly to defendants who took no precautions at all. The defendant’s compliance or failure to comply with custom would not go into evidence. And if she fails to produce such evidence. where contracting between potential injurers and victims is not practicable on account of high transaction costs. and the fact finder would consequently ignore it. it would enable physicians to administer innovative treatments without exposing themselves to an increased risk of liability. If a plaintiff claims that the novel technology is unsafe. when courts determine whether the precautions undertaken by the plaintiff were adequate. at 377–79 (questioning the wisdom of the heightened informedconsent requirements for experimental treatments). nor in product liability suits. Finally. without taking conventional precautions against that damage. 114. Accordingly. we propose to eliminate the anti-innovation bias by abolishing the rules that establish this bias. Every tort suit would then involve a custom-free examination of the risk of harm of the defendant’s activities. the judge should dismiss the lawsuit. In particular. No other expert 113. In the areas of product liability and general liability for accidents. the defendant’s negligence ought to be proven. 107:285 113 treatments. See supra notes 51–56 and accompanying text. The res ipsa rule should not allow such a plaintiff to move her suit to the jury—a prospect that presently exposes innovators to a risk of 114 losing the case and puts them under serious pressure to settle.PARCHOMOVSKY & STEIN FINAL PRINT1 B. . This reform would place innovative treatments on an informational par with conventional ones. the law should permit innovators’ experts to testify in their defense. when courts decide the “risk-utility” of product designs and set “consumer expectation” criteria. By doing so.
at 923–24. therefore. Human experience. provides no reasons for being indiscriminately suspicious of novel technologies and medical treatments. it should be able to defeat its rivals 115. The gist of this objection is that conventional knowledge and technologies have been tested by and received affirmation from experience.W. 15 Rand J. The legal system consequently should design rules that induce firms and individuals whose activities might cause harm to another person to use conventional knowledge and technologies and exercise caution with innovations. Admissibility of the innovator’s expert testimony. dubbed the 115 “life of the law” by one great jurist.. Econ. Any novelty. it holds that those rules minimize the costs of 116 adjudicative errors and error avoidance as a total sum. 404 (1984) (observing that parties’ symmetrical information about trial’s outcome promotes settlement and analyzing the nature and probability of settlements under asymmetrical information). Conventional knowledge and technologies have indeed been validated by human experience. 116. The cost of error avoidance. See generally Lucian Arye Bebchuk. Holmes. Jr. the rules increase the probability of an out-of-court settlement by making adjudicative proce119 dures and decisions more predictable. Litigation and settlement under imperfect information. 119. Finally. supra note 16. See Morris. Specifically. supra note 16. Custom rules minimize the sum of those costs in three distinct ways. on the other hand.. while new technologies and knowledge have not yet passed this test.PARCHOMOVSKY & STEIN FINAL PRINT1 B. If a piece of experience-based knowledge is sound. therefore. 118.DOC November 2008] 10/20/2008 10:52 AM Torts and Innovation 311 can properly develop the innovator’s claim that her novel technology is safe. This is what many rules of evidence actually do. Some novel technologies and treatments are unsafe. . a factor that weighs in their favor. needs to be accepted or rejected on the merits. For this reason. The first objection is that our analysis underestimates the importance of experience. The cost of adjudicative errors is defined by the value of liabilities and entitlements that adjudicators mistakenly fail to recognize (and the legal system consequently fails to enforce). O. This is what the custom rules do. Foundations of Evidence Law 141–71 (2005). We believe that the experience-based objection is overstated. See Henderson. 1881). society would do well to deem the time-honored conventional knowledge and technologies less hazardous than the new ones. 117. however. They protect damage-producing but still faultless firms against adju117 dicators’ biases and populist temptations. but many others are both safer and more efficacious than conventional alternatives. & Co. at 1147–49. should not depend on whether it aligns with accepted wisdom. Our reform proposal gives rise to two objections. See Alex Stein. The Common Law 1 (Boston: Little. Brown. The second objection focuses on the adjudicative efficiency of the custom rules. We consider these two objections in order. aggregates the expenditures on procedures and decisions that enhance accuracy in adjudication. They also set dependable shortcuts for determinations of negligence by adjudicators who might decide 118 cases erroneously if left to their own devices.
J. and Cognition. The efficiency-based objection to our proposals is equally unconvincing. hard to see how the custom rules’ advantages can offset the value of depressed innovations. Innovations that fail to receive the relevant 120. under Hayek’s theory. see also id. They are frequently drawn by owners and producers of conventional technologies. It is possible. It is. therefore. that some readers may be wary of our call to abolish custom rules and would prefer to retain them. & Liberty 147 (2005) (expounding Hayek’s theory of private and decentralized information production). This point echoes Hayek’s economic theory of information production. To do so. therefore. The saving in adjudicative costs stemming from custom rules has a limit. Lines separating the novel from the conventional are not always drawn by impartial scientists. at 149–50 (attesting that.PARCHOMOVSKY & STEIN FINAL PRINT1 B. Unsound knowledge does not deserve that reinforcement. we next delineate an alternative reform proposal that would make tort law more innovation friendly without abandoning the custom baseline. To put the minds of such readers at ease. .DOC 312 Michigan Law Review 10/20/2008 10:52 AM [Vol. The benefits that a single lifesaving technology or medical treatment can produce over time may well be greater than the total saving of adjudicative costs generated by the custom rules. 1 N. Posner. Law. Equalizing Up: Elevating Innovations to the Status of Custom If policymakers deem the advantages stemming from the use of custom rules worth keeping. 107:285 by its own epistemic force. The state should not protect these incumbents’ interests by setting up rules that disfavor innovators. Consequently. Furthermore. special private boards of industry experts will be set up to review the safety of scientific and technological innovations in their relevant areas of expertise. legal sanctions should be used to enforce only abstract customs that set general frameworks for people’s interactions). the state should normally stay away from the marketplace for knowledge and 120 technologies. the question whether the benefits from abolishing the custom rules would outweigh the costs thereof is an empirical one. it should not be protected against innovators’ challenges. they can make tort law more innovation friendly by granting certain (not all) new technologies the same privileged status as custom. The incumbent incentive is another reason for removing the a priori suspicion from novel technologies and medical treatments. Innovations that successfully pass the inspection process will be entitled to the same status as customary and conventional technologies and will receive the same deference from courts in tort suits. Courts. See Richard A.Y. of course. will recognize those boards’ findings by treating them as equivalent to customs.U. B. Sound knowledge needs no special reinforcement from the law. Ultimately. We are not aware of any empirical studies that analyze this question. Innovators will then be able to submit their innovations for review by the relevant board. Hayek. the social loss resulting from the innovations depressed by the custom rules is likely to be much greater. who are motivated to obstruct innovations in order to maintain their superiority on the market. and if it is questionable. in turn. L.
e. for Drug Evaluation and Res. preempt conflicting tort actions against manufacturers). v.. Inc. First. The agency consequently can “equalize up” new technologies that are yet to become state-of-the-art. 122. If a board fails to reach a decision during a period of two years.S. preempt conflicting tort actions against car manufacturers).L.Ct.DOC November 2008] Torts and Innovation 10/20/2008 10:52 AM 313 board’s approval will be deemed unsafe in any subsequent tort litigation.. our equalizing-up mechanism effectively shields the innovator from liability in torts. This reform would do away with the custom rules. and Cosmetic Act. See. Also. Whether it will do so often enough is an open question. Finally. Owen.” Theresa J. Ctr. Henderson. while an FDA approval of a drug or medical device does not always have such effect. Why Negligence Dominates Tort. 2 (2005). fee-based review system.. 529 U. Approval Process for Medical Devices: Legislative Issues and Comparison with the Drug Model 33 tbl. proper scientific review of a novel technology may require lengthy experiments. Dep’t of Health and Human Serv. once again.10 at 558 & n. But see Riegel v. 377 (2002) (analyzing problems that a transition from negligence to strict liability would engender). The federal preemption mechanism is another far-reaching alternative. 470 (1996) (holding in connection with medical devices that FDA approval pursuant to section 510 of the Food. Lohr.. Third. Our two-year limit proposal accounts for the modern tendency to shorten the approval period. David G. as amended by the Medical Device Amendments of 1976. 128 S. First. 861. See James A. the average period for a new drug’s non-expedited approval by FDA was eight and a half years. the review process will delay the introduction of new technologies to markets. both new and generic. Even so. Michele Schoonmaker.PARCHOMOVSKY & STEIN FINAL PRINT1 B. while the average period for a pre-market approval of medical devices is five months. Drug. innovators who are certain of the safety of their products and services may choose not to subject them to board review and take their chances with courts. 121. Honda Motor Co. but is also mindful of four additional factors. 999 (2008) (holding that when a medical device satisfies the FDA requirements for its pre-market approval. Geier v. 1998). the proposed review system is private and optional rather than state-imposed and compulsory. The CDER Handbook 5 (rev. and until it is completed consumers will not be able to enjoy the innovations. as amended by the Medical Device Amendments of 1976. but only by generating several new 122 costs. Eradication of the anti-innovation bias also can be achieved by substituting the faultbased doctrines of negligence and product liability with a no-fault regime of strict liability.56 (2005) (attesting that drug manufacturers are liable for defective drugs despite FDA’s clearance and presenting relevant case-law). the FDA system. unlike ours.. which likely causes much greater delays in the introduction of innovations and sometimes blocks them altogether. Following this decision. the proposal probably represents a significant improvement over the current regime. and Cosmetic Act. Jr.. has no approval-by-default provision in the event of unduly delayed review. CRS Report for Congress. Am. 999 (holding that requirements for premarket approval of medical devices.. 864–86 (2000) (holding that the DOT’s Federal Motor Vehicle Safety Standards. 347 (1995–96). Riegel. The review process is likely to take months.S. since the review is not mandatory. issued by FDA pursuant to section 510 of the Food. Under the accelerated. promulgated under the National Traffic and Motor Vehicle Safety Act of 1966. 128 S. This mechanism blocks tort actions complaining against technologies that comply with the safety standards set by the appropriate federal agency. A comparison with Federal Drug Administration (“FDA”) review is instructive. . Second. but in a radical and intensely controversial way that we avoid recommending. 518 U. In a not so distant past. the innovation. it takes about a year on average for the FDA to give a premarket approval to a drug. Inc.g. The U. the manufacturer will defeat the tort action). the approval period ranged between “months or even several years. will be deemed as safe as any technology or medical treatment 121 approved by custom. & Health 343. Ct. See Medtronic. 50 UCLA L. the FDA may equalize-up the status of innovative medical devices. Pulley Radwan. Medtronic.S. Products Liability Law § 8. For medical devices. does not block tort actions in state courts for both negligence and product liability). Rev. Meeting the Objectives of the MDA: Implied Preemption of State Tort Claims by the Medical Device Amendments. Drug. The proposed mechanism will alleviate much of the anti-innovation bias that plagues the existing system of torts. 10 J.
less salutary effect. indeed. reasons. We were not able to find any historical records that address this . The proposed review boards must be funded. Tort law is commonly thought of as a mechanism of assigning liability to wrongdoers and thereby forcing them to internalize the costs they impose on others. It is quite possible that policymakers failed to appreciate the connection between tort liability and innovation. it only gives them an option to do so. this hidden effect may well be inadvertent. this cost increase may thwart commercialization of certain innovations and the production of others. for the reasons provided in Part II. it should be extended to other industries. Furthermore. the problem may be more acute. is its primary effect. This. One practical way to assess this tradeoff would be to implement our proposal in a single industry and measure the net effect.PARCHOMOVSKY & STEIN FINAL PRINT1 B. it is difficult to see how our proposal will make innovators worse off relative to the existing system. Once again. should include the value of innovations that the custom rules presently depress. Conclusion Innovation. it must be borne in mind that our proposal does not force innovators to submit their innovations to board review. and it will be the innovators who submit applications for review who will have to pick up the bill. On the margin. By establishing safe harbors for industry customs and conventional technology. we believe that the adverse effect of the current regime is greater. At the end of the day. Hence. If the small scale experiment proves successful. reviewers can play favorites with innovators and base their decisions on personal. it would be necessary to compare its chilling effect on innovation to the chilling effect of custom rules. policymakers ought to assess the net benefit from adopting our proposal and compare it to that of the custom rules. Board members who review applications must be as independent as possible. tort law taxes innovation and influences its course. Our proposal gives rise to still other costs: rent-seeking and favoritism. is affected by legal rules. tort law has a second. we are not aware of empirical data that can aid policymakers in making this determination. and our proposal is obviously no exception. Yet if board members are selected from firms within every industry. of course. Likewise. in deciding whether to retain the custom rules. implementation of the proposal will create new costs. To determine the social desirability of our proposal. The additional cost borne by innovators will increase the cost of commercializing innovations. The specter of these twin problems arises with respect to any administrative process. as we demonstrated in this Essay. Yet. we analyzed the effect of tort liability on innovation. Yet. 107:285 Second. Did policymakers intend to create this effect? For all we know.DOC 314 Michigan Law Review 10/20/2008 10:52 AM [Vol. like all other human behavior. preferably without prior affiliation to any of the firms whose innovations come under review. rather than professional. Whether to use this option or live with the current custom-driven regime is the innovator’s call. This assessment. In this Essay. Board members can seek side payments from innovators as a condition for approving their technologies.
We openly admit that our solutions are not cost-free. There is no necessary connection between the deterrent effect and the anti-innovation effect of tort law. As we explained. the two can be easily decoupled.PARCHOMOVSKY & STEIN FINAL PRINT1 B. is that there is no a priori reason why tort law must impede innovation. policymakers can accomplish this result either by eliminating courts’ reliance on custom in making liability determinations or by instructing courts to give innovations whose safety was verified by independent industry experts the same deference they give custom. It is possible to benefit from the deterrent effect of tort liability on wrongdoers without paying a significant price in the form of forgone or distorted innovation. but the costs to which they give rise are likely to be far outweighed by the benefits of unhindered innovation.DOC November 2008] Torts and Innovation 10/20/2008 10:52 AM 315 issue. however. What is more important. .
107:285 .DOC 316 Michigan Law Review 10/20/2008 10:52 AM [Vol.PARCHOMOVSKY & STEIN FINAL PRINT1 B.
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