Quantum Physics, Econometric Models
and Property Rights to Information
R. Grant Hammond*
The problem of how one translates the capacities inherent in intellectual and other
inventions into property rights upon which a return is claimed I find oppressively
difficult.’
Information is a somewhat recalcitrant economic good.2
Introduction
It has been suggested that some of the western high-technology
countries, having passed through agricultural and industrial revolutions, are
now entering into a post-industrial state typified by information-based
economies.3 A landmark study in the United States demonstrated that as
long ago as 1967 twenty-five per cent of the United States Gross National
Product (GNP) originated with the production, processing and distribution
of information and related goods and.services. The purely informational
requirements of planning, co-ordinating and managing the rest of the
economy took another twenty-one per cent of the GNP. It is possible to
verify the obvious inference that an information-based economy has arisen
in that country by studies of the structure of the work force. Such studies
duly revealed that these “informational” activities engaged forty-sixper cent
*Of the Faculty of Law, Dalhousie University. I am grateful for comments by Professor
Michael Trebilcock, Director of the University of Toronto Lawand Economics program, on
an early draft. I benefited also from collegial comments at a Dalhousie Law School Faculty
Seminar. I am responsible for the approach adopted to the subject matter, and the content.
I David, Proceedings of a Special Conference on Research and Development,
Technological Education and Industrial Property: Policy Correlationsfor the 1970s (1971-
72) 15 IDEA The Journal of Law and Technology 477.
2 G. Thompson, Memo from Mercury: Information Technology is Different ( 1979 ), 30.
3″In pre-industrial societies –
still the condition of most of the world today… life is
primarily a game against nature. [In] industrial societies… life is a game against fabricated
nature… . A post-industrial society is based on services. What counts is not raw muscle
power, or energy, but information.” D. Bell, The Coming of Post-Industrial Society (1973),
126-7; see also D. Bell, The Winding Passage (1980); F. Machlup, The Production and
Distribution of Knowledge in the United States (1972); Parker, Social Implications of
Computer/ Telecoms Systems, 1 (1976) Telecommunications Policy 3.
It is not necessary for the purpose of this essay to attempt an intrinsic definition of
“information”. The term extends well beyond scientific information. There is a continuum
which runs from pure ideas through information,.data and know-how, and into the areas
conventionally covered by the statutory monopolies.
48
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of the work force and earned fifty-three per cent of all labour income. 4 This
development is not confined solely to the United States: preliminary studies
in Canada indicate that about half of the GNP and more than half of
Canadian employment are attributable to the production, storage and use of
information. 5
Economists and social scientists have begun to grapple with the
problems presented by this profound structural shift away from an industrial
4 These statistics are taken from M. Porat, The Information Economy: Definition and
Measurement (1977), vol. 1, 4-8. See also Porat, “Communications Policy in an
Information Society”
in G. Robinson, Communications for Tomorrow: Policy
Perspectives for the 1980s (1978), 3. I acknowledge a real intellectual debt to Daniel Bell and
Marc Porat. They have been in the vanguard of those North American scholars who in
recent years have recognized that information has come to occupy a critical role in
contemporary life. Bell’s analysis is conducted on a complex, abstract methodological basis.
A schema of “axial principles” which both energize and organize society is created ; this
schema in turn provides a number of perspectives from which macro-historical change can
be interpreted. The methodology and the insights suggested created voluminous, but fruitful
commentary. For a recent critique of Bell’s methodology see T. Jones, Options for the
Future: A Comparative Analysis of Policy- Oriented Decisions (1980), 111.
If Bell recognized the qualitative importance of the information phenomenon, Porat
perceived his task as a quantitative one, i.e., to measure the extent of the phenomenon. His
massive study involves fundamental changes in conventional economic classifications. Porat
divided the United States economy into a primary information sector (all those industries
which in some way produce, process, disseminate, or transmit knowledge or messages) and a
secondary information sector (which includes the public and private bureaucracies). The
primary information services produced in the economy are sold in information markets ; the
secondary information services are intended for internal consumption. It is not difficult,
given this approach, to reclassify the structure of the work force and to realign standard
public accounts to obtain the appropriate percentages for the primary information sector.
The secondary GNP figure has to be obtained by a hypothetical sale : the information aspect
of the firm’s activities is sold to the non-information side. The value added by the secondary
“inner firms” is defined as the employee compensation paid to information services in non-
information industries plus the capital services of information machines. The net result is a
tool capable of being used by policy makers and interested researchers in fields related to
information and technology to analyze problems of legal and economic dimensions. Porat’s
analysis is not free from either classification or accounting problems, but on any view of the
matter his study does document a profound structural shift. Some of the accounting
problems with Porat’s work are discussed by Walderhaug, “The Information Economy:
Issues of Relevance”, in Proceedings of the Sixth Annual Telecommunications Policy
Research Conference (1979), 231. See also A. Carter, Structural Change in the American
Economy (1970); M. Olson, The Logic of Collective Action: Public Goods and the Theory
of Groups (1965); Arrow, Limited Knowledge and Economic Analysis (1974) 64 (No. 1)
Am. Econ. Rev. I ; Spence, “An Economist’s View of Information”, in Annual Review of
Information Science and Technology (1974), vol. 9.
5 J. McLean, The Impact of the Microelectronics Industry on the Structure of the
Canadian Economy (1979), 4; Economic Council of Canada, Report on Intellectual and
Industrial Property (1971), chap. 2; J. Sauv6, The Telecommunications Revolution:
Canada Must Play to Win, Press Release, Dept of Communications, 21 March 1979. See
also S. Serafini & M. Andrieu, The Information Revolution andits Implicationsfor Canada
(1981).
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PROPERTY RIGHTS TO INFORMATION
paradigm. 6 Lawyers in turn will have no alternative but to confront the
inevitable problems of realigning institutions and legal thinking.
information-based economy. First, how
Two broad kinds of questions emerge in a state undergoing a transition
information
to an
infrastructure itself to be arranged? Second, how are the information
the broad spectrum of finance,
technologies
government, media and transport ? It is not necessary to indulge in the full
rigours of arcane econometric modelling to be aware that such an economy
creates several subsidiary long-term problems for socio-legal-economic
analysis.
to be applied across
the
is
(i) A large percentage of the population will be divorced from the more
physical aspects of industrial activities, so that intellectual acumen and
technological skills will be at a premium. The concomitant problem of
labour displacement will require social ingenuity both in altering the criteria
of employability and in reformulating educational programs. Formal
education will be effective only if it provides an extensive and universal basis
for continuous learning. To the degree that unemployment places growing
numbers of persons outside the mainstream of society, it is not just an
economic problem but has serious psychological and cultural consequences.
(ii) There will be a sharp increase in the “bureaucratisation” of society
to
and an increased subservience
run the service and information-based economy. Hence bureaucracy itself
becomes an elaborately developed form of social technology.
the social machine
required
to
(iii) Extraordinary changes will occur in the way in which both
knowledge and language are conceived. An acute intellectual discontinuity
occurs when man has to come to terms with his own intellectual “tools” in
the form of advanced electronic devices. 7
6 The term “industrial paradigm” was first used in Harman, The Coming Transformation,
(1977) 11 Futurist 4, 106. The term “paradigm”, i.e., a particular way of thinking, perceiving
and doing that is associated with a particular vision of reality, owes much to T. Kuhn, The
Structure of Scientific Revolutions (1967).
7 See Tribe, Technology Assessment and the Fourth Discontinuity: The Limits of
Instrumental Rationality (1972-73) 46 So. Cal. L. Rev. 617. I am grateful to Professor R.
Macdonald of McGill University for the reference. See also Leff, Law and Technology: On
Shoring up a Void (1976) 8 Ottawa L. Rev. 536, and Leff, Law And(1978)97 Yale L.J. 989.
The term “discontinuity” is commonly used by sociologists and intellectual historians.
Some theorists who espouse functionalism, developmentalism or evolutionism attempt to
identify “continuous” lines of societal or intellectual development. Others (“discontinuists”)
attempt to identify particular “turning-points” which have changed or will change the very
contours of society or ideas. The clash between continuous and discontinuous paradigms is
currently most pronounced in the so-called “growth debate”: see, e.g., D.L. & D.H.
Meadows, The Limits to Growth (1972); H. Kahn, The Next Two Hundred Years (1976).
Other theorists adopt what has been called a “dice model” of change and reject models
drawn from organic growth, whether continuous or discontinuous. See, in particular, R.
Mc GILL LA W JOURNAL
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(iv)
Information may become a “currency” of the age. The know-how
element already forms a significant portion of the consideration in many
commercial transactions.
(v) There are likely to be profound changes at many levels of formal
legal ordering. Access to information will become an issue of critical legal
relevance, replacing a concern with industrial organization and hence with
subjects such as labour law and relations, competition policy and the
ordering of financial markets. The growing awareness of this issue is
manifested in the increasing pressure for both freedom of information and
privacy enactments in those western countries which do not already have
them.
(vi) As a consequence of (v) a very difficult question of principle arises:
should the formal ordering of information be addressed through the
ascription of property rights ? This broad issue provides the subject for this
article.
Some recent law-review literature asserts that new kinds of proprietary
rights related to information are emerging, although none of the articles go
beyond the modest analysis of decided cases. 8 It is possible that their
Nisbet, Social Change and History: Aspects of the Western Theory of Development (1969),
and R. Nisbet, History of the Idea of Progress (1979). See also Samek, Beyond the Stable
State of Law (1976) 8 Ottawa L. Rev. 549.
8 Libling, The Concept of Property: Property in Intangibles (1978) 94 L.Q.R. 103;
Ricketson, Confidential Information – A New Proprietary Interest? (1) (1977-78) 11
Melbourne U.L. Rev. 223 ; Neave & Weinberg, The Nature and Function of Equities(1978)
U. of Tasmania L. Rev. 24, 115; Stone, From Principles to Principles (1981) 97 L.Q.R. 224,
esp. note 34. The views of P. North proceed implicitly on the same thesis: Breach of
Confidence: Is There a New Tort ? (1972) 12 J.S.P.T.L. 149. That commentator’s views are
carried through into U.K. Law Commission Working Paper No. 58. See also Report on
Intellectual and Industrial Property, Appendix A, supra, note 5. Libling documents some
cases in which extensions of proprietary theory have occurred in the twentieth century. The
thesis is unassailable in claiming some kind of extension of the concept of property by the
courts, but the author is much less convincing in his conceptualisation of that extension.
“Entities” as such do not much matter today; neither does a “value added” approach,
although some judges still endeavour to reason that way. (If Robinson Crusoe lived alone on
an island, could his creation of “entities” be said to create property rights ?) Neither is
property a didactic relationship between a person and a thing, as both Hegel and Blackstone
seem to have thought. See the extracts cited in H. & F. Cohen, Readings in Jurisprudence
and Legal Philosophy (1951), 73.
“Property” is today essentially concerned with relations between persons, and the
analogy with tangible things is quite misleading. See B. Ackerman, Economic Foundations
of Property Law (1975); F. Cohen, Dialogue on Private Economics of Legal Relationships
(1975). The older conception of property –
as limited to rights enforceable against an
indefinite number of third parties, such as the rights and interests a man has in land and
chattels to the exclusion of others – does not now even approach the way courts in fact act
on this question. And for the common law jurisdictions, property is clearly not numerus
clausus as it apparently is in civil law. See P. Arminjon, B. Nolde & M. Wolff, Traitdde droit
compard (1950-51) t. III, 38.
1981]
PROPERTY RIGHTS TO INFORMATION
methodology is not analytically adequate to deal with the real dimensions of
this issue. Micro-analysis of a retrospective character may not yield all the
perspectives which can be usefully applied to a problem of society-wide
dimensions. Hence, the following approach has been adopted: first, with the
assistance of very basic economic and public-policy analysis, an attempt is
made to articulate some of the problems which might arise out of the
ascription of property rights to information ; second, a brief review of some
areas of the law where those problems have already arisen is undertaken;
and third, some tentative conclusions and suggestions are proffered
concerning the kinds of questions which ought to be debated.
Several caveats should be noted. First, this article is set against the
is a particular
construct of an information-based economy, which
abstraction. Modern societies are too complex to be viewed through any
single construct or prism. This construct is useful because it enables certain
features of legal ordering, which might otherwise go unnoticed, to be
identified. It should be emphasized that several other intellectual windows
into the characteristics of the interior of contemporary society are possible:
no conceptual scheme ever exhausts a social reality.
Second, although this article is concerned in a broad way with the
ascription of property rights to information, it does not purport to offer any
answers to narrowly defined issues. Its primary purpose is to disrupt
unquestioning faith in the appropriateness of conventional proprietary
notions in the formal ordering of information.
Third, if the preliminary evidence of economists and sociologists is
accepted on even a provisional footing as suggesting a profound shift in the
nature of Canadian and American society, then North American lawyers are
about to experience different kinds of problems than they have heretofore
had to deal with. Those problems will require different ways of thinking.
Fourth, it is not at all clear that a common conceptual framework has
evolved to deal with these new kinds of issues. We have the different
approaches of economists, engineers, social scientists and lawyers all
operating against a backdrop of differing political, socio-economic and
ideological perspectives. Even within the legal profession there is no truly
shared discourse: telecommunications, copyright and computer lawyers, for
instance, have all developed different vocabularies. Yet lawyers do not enjoy
the luxury of open-ended debate; concepts and answers have to be struck
because the profession advises on actual problems. Ex ante debate,
particularly from the academic wing of the legal profession, is necessary.
In the area of “intellectual property” there is still much profit to be gained from
Tawney’s essay, “Property and Creative Work”, reproduced in C.B. MacPherson,
Property: Mainstream and Critical Positions (1978), 135.
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the commercial community
Fifth, the history of legal responses to new information and knowledge
suggests two critical challenges. The first relates to the ability of the
profession and
to devise new social
arrangements that will ensure both the creation and the effective and
profitable utilisation of new information and technology. The second
challenges a liberal society to protect its basic political and human values
from unwise applications or withdrawals of that new knowledge. The real
question is whether the institution of “property” is an appropriate vehicle for
addressing those challenges.
Sixth, lawyers are going to have to become more interested in the
economics of information. North American lawyers in particular have
tended to try to conceptualize information as a commodity. It is not at all
clear that such an approach is economically tenable, because information
shows remarkable resistance to such treatment. This article will suggest that
the legal equivalent of a shift from Newtonian physics to quantum
mechanics may be required. Lawyers, economists and policy makers may
have to face the possibility of thinking about some kinds of information as a
resource in society rather than as a commodity. 9 This would be consistent
with its character as a collective economic good. Such a thesis cannot
presently be more than exploratory, and if accepted,
it would have
widespread structural and institutional implications, which would need to be
worked through and tested in a series of intensive studies. The author might
be prepared to argue, on another occasion, that there is even a moral basis
for departing from a view of information as a commodity, in so far as the
learning capacity of a nation may be at issue.10
9 The distinguished Canadian historian, Harold Innes, turned in his later works from a
study of staples, e.g., The Fur Trade in Canada: An Introduction to Canadian Economic
History rev. ed. (1970), to studies of the history and technology of communications by
treating the latter in much the same way as he had looked at staples. See, e.g., Empire and
Communications rev. ed. (1972).
Innes apparently thought that such technologies
influenced societies, institutions and cultures in the same way as the exploitation of staples
had influenced them. Yet, curiously, (because Innes inveighed against monopolies of
knowledge) he never grasped the idea that what might be at stake was a resource. For
reviews of the “link” between the early and the later works of Innes see B. Berger, The
Writing of Canadian History (1978) and Patterson, Harold Innes and the Writing of History
(1979) 83 Can. Lit. 118. J. McHale explored some resource implications of communications
in The Changing Information Environment (1976).
‘0 The term “learning capacity” was struck by Soedjatmoko in The Future and the
Learning Capacity of Nations: The Role of Communications (1978). Soedjatmoko,
adapting the “basic needs model” developed by internationalists, argued that the social
transformations required in post-industrial society depend crucially upon the collective
capacity of the particular nation to generate, ingest, reach out for and utilize vast amounts of
information. Innes fumbled towards the same thought at the level of the individual:
“Culture is concerned with the capacity of the individual to appraise problems in terms of
space and time and with enabling him to take the proper steps at the right time”, H. Innes,
The Bias of Communications (1951), 85.
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PROPERTY RIGHTS TO INFORMATION
I. Problems in the ascription of property rights to information
It is probably impossible to arrive at a working definition of “property”
which would satisfy all lawyers and economists. The most that can be done in
an exercise of this kind is to offer an explanation of how the institution of
property is used as an instrument of formal ordering in contemporary North
American society.
All western legal and economic systems have been grounded on the
explicit recognition of property rights but the concept of property has by no
means been a static one. Property is today best understood in terms of
relational equities: property rights are the sanctioned behavioural relations
among men that arise from the existence of goods and pertain to their use.
These relations specify the norms of behaviour with respect to “goods”
that each
–
and every person must observe in his daily interaction with others, at least
without bearing some cost as a result of non-observance. Hence the
prevailing system of property rights in a community is the sum of the
economic and social relations, with respect to scarce resources, in which
individual members stand to each other.”
something which yields utility or satisfaction to a person –
It
is by means of exchange that the prevailing property rights
assignments in an economy affect the allocation of these resources. Trade
generates contractual agreements not to exchange goods but to exchange
bundles of property rights to do things with these goods. The right of
ownership is generally recognized as a subcategory of a more generalized
I Some economists, basing themselves on orthodox micro-economic theory, might
question the inclusion of the word “social” here. But even the courts –
traditionally among
the most conservative of social institutions –
have recognized massive conceptual
extensions of the term “property” since the eighteenth century. For instance, the United
States Supreme Court recently noted that “the dichotomy between personal liberties and
property rights is a false one… a fundamental interdependence exists between the personal
right to liberty and the personal right in property”: Lynch v. Household Finance Corp. 405
U.S. 538, 552 (1971) per Stewart J. Charles Reich, in his much discussed essay The New
Property (1963-64) 73 Yale L.J. 733, argued that government largess was becoming
destructive of the economic basis of liberty and suggested the need to find “a new property”.
He clearly meant a new political and social order : property as a different kind of institution
in face of the threats he described. It must be recalled that American courts have sanctioned
considerable “extensions” of the term “property” to bring some fact patterns within the
Fourteenth Amendment of the United States Constitution. See also B. Ackerman, Private
Property and the Constitution (1977).
A good deal of American legal writing and analysis in the property area has been
influenced by W. Hohfeld. See Hohfeld, Some Fundamental Legal Conceptions As Applied
in Judicial Reasoning (1913) 23 Yale L.J. 16; Hohfeld, Fundamental egal Conceptions As
Applied in Judicial Reasoning (1917) 26 Yale L.J. 710; Corbin, Jural Relations and Their
Classification (1921) 30 Yale L.J. 226; Vandevelde, The New Property of the Nineteenth
Century: The Development of the Modern Concept of Property (1980) 29 Buffalo Law
Rev. 325.
McGILL LAW JOURNAL
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conception of property rights and as including at least three elements: the
right to use the asset, the right to appropriate returns from the asset, and the
right to change the asset’s form. Ownership is not generally conceived in an
unrestricted way: the right of ownership is an exclusive right in that it is-
limited only by those restrictions explicitly stated in the law. These restric-
tions recognize perceived social imperatives. It follows from all of this that an
asset’s properties can be defined both by its technical properties and by the
particular set of legal restrictions governing its use and exchange. This con-
ceptualization has been recognized through constitutional, statutory and
judicially created provisions. The net result is that to say something gives rise
to a proprietary right is at once comforting, convenient and “legal”. The at-
tachment of this appellation immediately brings into play a body of
established doctrine and remedies painfully evolved over several centuries.
Yet the most striking characteristic of information is that it does not fit easily
with extended concepts of property.
First, sole ownership is vastly complicated in the case of information.
The act of theft is often impossible to detect and difficult to prove. A piece of
information can be “owned” by two people at the same time without any
denial of the conventional benefits of ownership. Second, some kinds of
information can be infinitely multiplied at low cost. Third, information
generally does not depreciate with use and some kinls of information of a
theoretical character actually inflate in value with usage. Fourth, unused
information is, in general, of no use but the moment information is used it
reveals both its existence and content and may actually enter what is
conventionally referred to as the “public domain”. Fifth, the creation of
information
is routinely a joint activity and the apportionment of
“creativity” is then rendered extraordinarily difficult. Sixth, the creation of
technology and information is tending to move on shorter frequencies:
commercial advantage is today inextricably intertwined with innovation.
Longer-frequency functional vehicles such as the statutory monopolies, are
becoming increasingly inapt for this pronounced shift in commercial time-
frames. Seventh,
the volume of available information has reached
overwhelming proportions. Classical economics assumes the possession of
complete information about the availability of different goods, estimation of
costs and maximization of utility preferences. But more information is not
complete information. The disabilities of the individual in relation to the sum
of knowledge become progressively more severe as the sum increases.
Eighth, in economic terms, public goods are separated from private goods by
a principle of exclusion. Although that principle can still apply to
information it is routinely invoked only at a considerable cost.
The concept of exclusion also suggests further critical problems for legal
analysis which are left untouched by conventional case analysis of ad hoc
legal disputes. In the absence of a system of property rights to information, a
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PROPERTY RIGHTS TO INFORMATION
market economy will probably not produce the optimal output of
information. There is no point in encouraging free-rider behaviour: X has
no incentive to incur costs in producing something Y may then use at no cost
to himself. Thus, if a society does wish to encourage innovation and the
generation of an optimal information stock, one functional vehicle it might
employ could be an extended system of “private” property rights. But if that
approach is adopted, a dilemma is created. There should then not only be a
concern about the stock of information, but also about what happens to it.
Once a fee or cost of some kind is placed on the use of information to
encourage creativity, as it is through the patent and copyright systems, two
very real difficulties arise. First, there may be under-usage of information,
since the optimal price for a public good is zero. 12 Second, denial of access to
information in an information-based economy is clearly an affront to the
most fundamental kind of rights: it is nothing less than a form of intellectual
and economic subjugation. The potentiality of this situation has not gone
unnoticed by third-world countries.
It is entirely possible that western legal systems have been much too
concerned with the creation of a sufficient stock of information and too little
concerned with usage and access. One explanation for such an imbalance has
already been hinted at: Angro-American law has a tradition of formal
ordering through the ascription of extended property rights and it is more
convenient to adapt existing rules and procedures than to think anew. A
Marxist would doubtless advance a more sinister view: property rights are
the underpinning of capitalism, and hence legalists will attempt to adapt new
phenomena to the traditional market economies in which both they and their
clients operate and profit. Another explanation might be that the extent of
the imbalance has not yet been perceived.
It seems clear that sound policy in the field of information creation and
dissemination should recognize the dilemma which has been described. The
thrust of legal and economic ordering should be to acknowledge that it is bet-
ter to have the information in the first place than not to have it at all. It has
12There has been real disagreement among economists concerning the optimal level of
private investment in information production. See K. Arrow, “Economic Welfare and the
Allocation of Resources for Invention”, in The Rate and Direction of Inventive Activity:
Economic and Social Factors: Proceedings – Conference of the Universities (1962), 607;
Demsetz, Information and Efficiency : Another Viewpoint (1969) 12 J. of Law and Econ. 1;
Marshall, Private Incentives and Public Information (1974) 64 (No. 3) Am. Econ. Rev. 373;
Hirschleifer, The Private and Social Value of Information and the Reward to Inventive
Activity (1971) 61 (No. 3, Pt 2) Am. Econ. Rev. 561. It seems to be widely accepted that a
legal system which recognized no property rights in information would necessarily produce
too little information. But some economists have argued that a system of property rights
may produce an over investment in information production. See, in particular, Hirschleifer,
supra. See also Bishop, Negligent Misrepresentation through Economists’ Eyes (1980) 96
L.Q.R. 360; A. Westin, Information Technology in a Democracy (1971); E. Mesthene,
Technological Change: Its Impact on Man and Society (1970).
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(Vol. 27
already been recognized in the areas of patent and copyright law that
informational and innovational activity are useful to the innovator and
creator and, in the long term, to the public. Further, disclosure and efficient
usage of this stock of information should be encouraged. This policy is
grounded partly in societal concerns: there is a very real danger that an
information underclass will be created because of the over-zealous use of
restrictive property theories. There are also sound economic reasons to
support this policy: research and information generation is expensive;
duplication of effort is wasteful; excessive secrecy promotes espionage, and
serious diversion of effort occurs every day in industry to find out what
competitors are doing.
It is a measure of the present failure of western legal systems that
industrial innovators are increasingly avoiding the very systems set up to
promote disclosure. Consensual agreements and trade-secret protection are
now the paradigmatic way of dealing with information, research and
development output. 13 Neither is the phenomenon of off-market innovation
and information creation confined to the private sector. Kenneth Arrow
long ago properly drew attention to government’s role as a provider of
information.14 There is a kind of market failure where the private cost of
producing information far outweighs any private advantage : a firm may not
have the capacity nor a sufficient market share to capture all the benefits of
information in the particular market. Thus there may be a need for legal
reform to rectify that kind of market failure and to encourage the disclosure
of the vast mass of information in government hands. The cheapest provider
of information in the future may routinely be a source with access to
government files.
II. The judicial and legislative response
Against these suggested concerns and strategies it may now be useful to
examine the response of courts and legislators to the issue of property rights
to information in some specific areas. Several important questions should be
kept in mind when considering these disparate areas. When proprietary
theory has been utilised in information related disputes, how have courts
conceptualized
the term “property”? Has the conceptualization been
13 See L. Harris, Nurturing New Ideas: Legal Rights and Economic Roles (1969); R.
Miller, Legal Aspects of Technology Utilization (1974); Wall, What the Competition is
Doing: Your Need to Know (1974) 52 (No. 6) Harv. Bus. Rev. 22. In Canada, see S.
Soloway, Public Access to Commercial Information in Government Files (1980). Massive
backlogs in the United States Patent & Trademark Office have been a contributing factor.
There are approximately 200,000 patent applications awaiting final disposal in the United
States Patent Office. Practitioners presently allow approximately two years for the
processing of an application.
14Supra, note 12.
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PROPERTY RIGHTS TO INFORMATION
consistent from one area of dispute to another? Or has “property” been a
variable construct functioning as a discrete response to discrete problems ?
What are the apparent effects of thus employing “property” analyses?
A. Breach of Confidence and Trade-Secrets
During the last two hundred years there has never been any doubt that
Anglo-American jurisprudence would allow relief for the unauthorized
disclosure of information imparted in confidence. Is But the basis on which a
court should or would interfere has been the subject of much debate. In
many instances contract provides an adequate framework for analysis: the
discloser is simply found to be in breach of an express or implied consensual
obligation.’ 6 Or, there may be a breach of an express trust or fiduciary
obligation. 7 The more interesting cases are those where the foregoing
judicial vehicles are not available on the facts. A court is then forced to
grapple squarely with the application of proprietary theory or proclaim a
biblical decree that a man shall not reap where he has not sown. 18
There has been a distinct difference in approach between the British
Commonwealth jurisdictions and American jurisdictions on this conceptual
issue. The majority of American courts have tended in recent years to
espouse proprietary theory whereas Commonwealth courts have clearly
opted in favour of an equitable obligation of good faith. In the former case,
the obligation is directed to a conceptualized economic “good” ; in the latter,
the obligation is directed to the defendant in person.
There are at least two logical difficulties in categorizing confidential
information or know-how as property. “First, circularity in reasoning is
surely involved in the assertion that the term ‘property right’… may be
attached to what is no more than a result of the courts’ consideration of the
total issues at stake in the proceedings”. 9 According to this argument, a
property right in ideas or information has absolutely no meaning apart from
the result it is desired to achieve. A property right in this sense is simply a
15 See Hammond, The Origins of the Equitable Duty of Confidence (1979) 8 Anglo-Am.
L. Rev. 71 ; Cornish, Protection of Confidential Information in English Law (1975) 6 I.I.C.
43; Vaver, Trade Secrets: A Commonwealth Perspective (1979) 1 E.I.P.R. 301 ; P. Finn,
Fiduciary Obligations (1977), 159; R. Milgrim, Trade Secrets (1978). The latest judicial
attempt at a definitive classification is the judgment of FullagarJ. in Deta Nominees Pty Ltd
v. Viscount Plastic Products Pty Ltd [ 1979] V.R. 167, 190 (Sup. Ct). Apparently, a Bill
relating to the action for breach of confidence is in the course of preparation by the U.K.
Parliamentary Council, based on Working Paper No. 58, supra, note 8.
16 Deta Nominees Pty Ltd, v. Viscount Plastic Products Pty Ltd, supra, note 15.
17 See Hammond, Is Breach of Confidence Properly Analysed in Fiduciary Terms ?(1979)
25 McGill L.J. 244.
18 See International News Service v. Associated Press 248 U.S. 215 (1918) [hereinafter
INS].
19 Hammond, supra, note 17, 247.
McGILL LAW JOURNAL
[Vol. 27
rationalization of a desired result: property is anything the court chooses to
protect. It was presumably this realization which prompted Holmes to argue
that “the word property as applied… to trade secrets is an unanalysed
expression of certain secondary consequences of the primary fact that the
law makes some rudimentary requirements of good faith.” 20 Second, it
seems highly unorthodox to describe as property that which “evaporates”
when it reaches the public domain, or when third parties, whether
independently or by reverse engineering, make the same discovery.
It may legitimately be asked whether the question of the “right” juristic
basis for a cause of action in breach of confidence or for disclosure of trade
secrets actually matters. Surely justice is done as long as the plaintiff can get
at the unauthorized disclosure or use. And, it might be said, whether it is
done by an attack on the subject matter or an attack on the person is not of
much moment. The first and most obvious problem with this approach is
that of remedies. Given the relatively open-ended nature of American
judicial remedies, those questions have some force in the United States.21 But
the British Commonwealth jurisdictions have shown little inclination to
move from-a hierarchical remedial structure to a horizontal structure
accommodating more eclectic remedies. 22 In those jurisdictions remedies
are ranked on the basis of outmoded jurisdictional concerns, creating an
illogical, artificial and inefficient hierarchy. Second, the manner in which the
20E.. Du Pont De Nemours Powder Co. v. Masland 244 U.S. 100, 102 (1917)
[hereinafter Masland]. See also Curry v. McCanless 307 U.S. 357, 366 (1939) per Stone J. :
“[Intangible property] rights are but relationships between persons… which the law
recognizes by attaching to them certain sanctions enforceable in courts.”
21 In general, American law allows a litigant relatively free play with the various avenues of
compensation, unjust enrichment or the traditional nominate equity remedies. The opening
up of American remedies law into something closer to an eclectic system clearly antedates
Brown v. Board of Education 347 U.S. 483 (1954), 349 U.S. 294 (1955), although there can
be no real quarrel with the thesis of Professor 0. Fiss that the “triumph” of Brown has been
highly persuasive: The Civil Rights Injunction (1978). See also Schwartz, The Case for
Specific Performance (1979) 89 Yale L.J. 271.
22 The English bar has not really grasped the possibilities of the recent challenge in United
Scientific Holdings Ltdv. Burnley Borough Council[ 1978 ]A.C. 904 by the House of Lords
to the well known Ashburner aphorism that “the two streams of jurisdiction [law and
equity], though they run in the same channel, run side by side and do not mingle their
waters”: W. Ashburner, Principles of Equity, 2d ed. (1933), 18. See also Baker, The Future
of Equity (1977) 93 L.Q.R. 529 and Hammond, Interlocutory Injunctions: Timefor a New
Model? (1980) 30 U.T.L.J. 240, 276.
Several commentators have suggested that breach of confidence could be clarified by
making a distinction between proprietary concepts based upon the secrecy of the content of
the information – which it is said, should attract “real” remedies –
and concepts based
upon considerations of good faith in relationships between parties – which should attract
“personal” remedies. See C. Tapper, Computer Law (1978), 31; Roberts, Corporate
Opportunity and Confidential Information: Birds of a Feather that Flock Together or
Canaeros of a Different Colour ?(1977) 28 C.P.R. (2d) 68 ; Nucor Corporation v. Tennessee
Forging Steel Service Inc. 476 F. 2d 386 (8th Cir. 1973).
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PROPERTY RIGHTS TO INFORMATION
courts articulate the basis of a right determines how it is treated and utilized
the courts have a
by
symbiotic relationship.
the commercial community. Commerce and
The chief result of property theory in this area in the United States has
been to encourage the evasion of the deliberate equilibrium created by the
statutory monopolies. This evasion has occurred notwithstanding the
claim of the United States Supreme Court that trade-secret protection is
than patent protection,23 and notwithstanding warnings by
“weaker”
respected American judges that precisely this eventuality might attend the
emergence of a dual system of protection.24
It is not easy to determine whether the other common law jurisdictions
have also favoured a stock of information and shown less concern with
usage. In theory, a system which espouses obligations based on “business
ethics” rather than proprietary notions should not attract the same concern
about “locking up” information. 25 Commonwealth courts have not engaged
2 Kewvanee Oil Co. v. Bicron Corp. 416 U.S. 470 (1974): “weaker” because it gives no
protection againts reverse engineering, does not operate against the world, and is subject to
greater risk of interception.
24As long ago as 1929 Judge Learned Hand, in commenting on INS, supra, note 18,
noted: “We are to suppose that the court meant to create a sort of common-law patent or
copyright for reasons of justice. Either would flagrantly conflict with the scheme which
congress has for more than a century devised to cover the subject-matter.” Cheney Bros v.
Doris Silk Corp. 35 F. 2d 279, 280 (2d Cir. 1929).
25There is a need for empirical research on this issue in the British Commonwealth.
Canadian intellectual and industrial property laws have been under investigation for a
decade with a view to a revision of the statute law, but none of the base studies consider trade
secret protection or compare it with the statutory monopolies. There is some doubt about
the legislative competence of the Canadian Parliament in the area of trade secrets, but the
omission is none the less surprising. See Economic Council of Canada, Report on
Intellectual and Industrial Property (1971); B. Hindley, The Economic Theory of Patents,
Copyrights and Registered Industrial Designs: Background Study of the Report on
Intellectual and Industrial Property (1971); 0. Firestone, Economic Implications of Patents
(1971).
It is difficult to draw comparisons between the United States and Japan on one hand
the
the British Commonwealth countries on the other. For the main part,
and
Commonwealth countries have been purchasers, as opposed to developers of technology.
See, e.g., Gilmour, Industrialisation and Technological Backwardness: The Canadian
Dilemma (1978) Can. Public Policy 20; Globerman, Canadian Science Policy and
Technological Sovereignty (1978) Can. Public Policy 34. This can give rise to an adverse
economic situation in which a declining percentage of GNP isr directed to research and
development at the same time as the information related aspects of the economy grow. For
instance, in Canada the percentage of GNP directed to research and development fell from
1.4 in 1967 to .9 in 1978 at the same time as the information components of the economy
grew. W. Flight, President of Northern Telecom Ltd, Financial Post Conference (Ottawa),
1980. See also supra, note 4.
A further complication is that –
adopting the analytical framework evolved by C.
the
Freeman
Commonwealth jurisdictions have not produced “offensive firms”, such as IBM, Texas
in his book, The Economics of Industrial Innovation (1974) –
REVUE DE DROIT DE McGILL
[Vol. 27
in dialectic concerning the merits of developing a dual system of protection
incorporating statutory monopolies and judicially sanctioned trade-secret
protection. But if it is assumed that free and unfettered trade is in general a
good thing26 and if the statutory monopolies are conceived as qualified
exceptions to that principle, then it is surely necessary to ask whether
Commonwealth courts are not in fact also carving out two islands of
monopoly –
in a
sea of free competition. Trade-secrets protected by common law rather than
statute are potentially a monopoly of unlimited duration –
something
which is not permitted in the area of patents and copyright and which creates
severe economic and remedial problems.
statutory monopolies and judicially protected “secrets” –
There are a number of cases which could be used to illustrate the
divergent approaches of courts in this difficult area of the law.27 One case
which raises most of the real problems is Foster v. Mountford and Rigby
Ltd.28
A group of aborigines applied for an interlocutory injunction to prohibit
the publication within the Northern Territory of Australia of a book
revealing their tribal, cultural and religious secret ceremonies. This book had
been written by an anthropologist, Dr Charles Mountford, who made a
foray by camel through the area inhabited by the nomadic Pitjantjara tribe in
1940. Dr Mountford was taken into the tribe’s confidence. He was shown
sacred sites and objects, paintings and rock engravings and he recorded
myths and totemic geography by means of aboriginal drawings, camera and
notebook. The book was printed thirty-five years later, when the original
“disclosers” of the secrets were dead.
The court accepted that the information had been imparted in
confidence. In the preface to his book,28aDr Mountford had added a caveat,
noting that “in areas where traditional aboriginal religion is significant, the
Instruments, Xerox and Mitsubishi. The link between the growth of these kinds of firms and
the particular intellectual and industrial laws of the various countries involved has not been
sufficiently investigated.
26 White v. Mellin [1895] A.C. 154.
27 Compare Sim v. Heinz Coy Ltd(1959) 76 R.P.C. 75 (H.C. & C.A.) with Metropolitain
Opera Association v. Wagner-Nichols Recorder Corp. 101 N.Y.S. 2d 483 (Sup. Ct 1950)
(property in a voice ?); Victoria Park Racing and Recreation Grounds Co. v. Taylor (1937)
58 C.L.R. 479 (H.C. Aust.) with Zacchiniv. Scripps-Howard433 U.S. 562 (1977) (property
in a spectacle?); Bernstein of Leigh (Baron) v. Skyviews & General Lid [ 1978 ] Q.B. 479,
with EL. du Pont de Nemours & Co. v. Christopher431 F. 2d 1012(5th Cir. 1970) (spying on
private property from the sky); Prince Albert v. Strange (1849) 18 L.J. Ch. 120 and Pollard
v. Photographic Co. (1889) 40 Ch. D. 345 with Pavesich v. New England Life Insurance Co.
50 S.E. 68 (Ga. 1905) (use of photographs and engravings without consent). See also the
several judgments in INS, supra, note 18.
28 (1976) 14 Aust. L.R. 71 (S.C. North Ter.). See also Attorney- Generalv. Jonathan Cape
Ltd [ 1976] Q.B. 752.
28aC. Mountford, Nomads of the Australian Desert (1976).
19811
PROPERTY RIGHTS TO INFORMATION
book should be used only after consultation with local male religious
leaders”. The plaintiffs asserted that “the revelation of the secrets to their
women, children and uninitiated men [might] undermine the social and
religious stability of their hard-pressed community”. 28b
As a matter of fundamental legal theory, how might a claim mounted on
such facts be sustained ? Perhaps the most extensive claim could be founded
on an asserted invasion of “privacy”, presumably treating that term as a
cultural norm. But the extent to which that kind of claim might be
recognized presently varies from jurisdiction to jurisdiction ;29 a privacy
theory does not fit easily with the facts of an information-based society.
Most personal information
is released during a voluntary economic
transaction. Giving information is the sine qua non for acquiring almost
anything today. Individuals “produce”
information at no cost to the
recipient and receive in return no protection for the “privacy” they forgo;
indeed, the recipient usually benefits through improved data bases which he
or she then utilizes for profit. In a good number of situations, privacy theory
simply will not assist the courts. The individual will be faced with an
assertion that information voluntarily created and exchanged has become
the property of some other person or institution, unless social imperatives
eventually give rise to legislation overriding such practices.
A more plausible argument might be that there was an “understanding”
with Dr Mountford that the information would be revealed to him on the
basis that it not be published. Consideration, perhaps in the form of the
agreement itself, but more likely in the form of trinkets, may have passed.
Hence it might be possible to argue on the basis of consensual theory or
alternatively, on the basis of an “understanding” of a kind which equity
would protect, i.e., an obligation to act in good faith. 30 Or, it might be said
that the tribesmen were in possession of something of scientific and
anthropological value, possibly even commercial value which they had
unsuccessfully attempted to keep to themselves and that the defendant had
gained it by a trick. Such an assertion, if true, would pose little difficulty for a
judge with equity jurisdiction. 3′
28b Supra, note 28, 73.
29 See, generally, Wacks, The Poverty of Privacy (1980) 96 L.Q.R. 73. Canadian courts
have come very close to allowing what some might regard as protection of privacy in Krouse
v. Chrysler Canada Ltd (1973) 1 O.R. (2d) 225 (C.A.); Athans v. Canadian Adventure
Camps Ltd (1977) 7 O.R. (2d) 425 (H.C.) and Racinev. C.J.R. C.-Radio Capitale(1977)17
O.R. (2d) 370 (Cty Ct). Each of these cases came within the category of privacy cases which
Prosser designated as “appropriation” of the plaintiffs name or likeness for commercial
purposes. Prosser, Privacy (1960) 48 Calif. L. Rev. 383, 403.
3 0 Seager v. Copydex Ltd [ 1967] I W.L.R. 923.
31See generally, Jones, Restitution of Benefits Obtained in. Breach of Another’s
Confidence (1970) 86 L.Q.R. 463.
McGILL LAW JOURNAL
[Vol. 27
The one element common to all of these claims is the assertion of
exclusivity in respect of that which passed to Dr Mountford. If that assertion
is adopted as a starting point, then it clarifies the dispute to some degree. For
instance, it then becomes clear that an attempt is being made to attach
exclusivity to something in a way which the law may or may not be prepared
to countenance, i.e., scientifically useful information. Social imperatives
might impel a decision that no such exclusivity be permitted, or that it be
permitted only on a sharply delineated basis.32
B. Fiduciary duties and appropriation of business opportunities
Anglo-American jurisprudence requires that persons
in particular
situations of “high trust” are to be classified as fiduciaries. The circumstances
under which fiduciary duties arise, and the questions –
to whom is he a
fiduciary? what obligations does he owe? what are the consequences of a
deviation from the fiduciary standard ? – have aroused a great deal of
juristic comment, which will not be explored in detail here.33 It is worth
noting, however, that English Chancery judges have had much less difficulty
in dealing with these issues than their North American counterparts. The
question to be asked is whether the latter have tended to pull the roof in over
their own heads by mixing quite straightforward equity concepts with
proprietary approaches.3 4 Thus, if a company director benefits personally
3 2My colleague at Dalhousie Law School, Professor Alastair Bissett-Johnson,
perceptively noted that Foster v. Mountford & Rigby Ltd involved an interlocutory
application restricted in scope to the largely uninhabited Northern Territory of Australia.
Assume that an application is made on an Australia-wide footing for a permanent
injunction. Would such an application succeed? Should it? See William Wilkins Co. v.
United States 487 F. 2d 1345 (Ct Cl. 1973).
33 The volume of literature is such that it could be suggested, not entirely facetiously, that
an article on this topic is a prerequisite for academic advancement. See, in general, Jones,
Unjust Enrichment and the Fiduciary’s Duty ofLoyalty (1968) 84 L.Q.R. 472; Weinrib, The
Fiduciary Obligation (1975) 25 U.T.L.J. I ; Prentice, The Corporate Opportunity Doctrine
(1974) 37 M.L.R. 464; Beck, The Saga of Peso Silver Mines :Corporate Opportunity
Reconsidered (1971) 49 Can. Bar Rev. 80; Shepherd, Towards a Unified Concept of
Fiduciary Relationships (1981) 97 L.Q.R. 51 ; Loss, The Fiduciary Concept as Applied to
Trading by Corporate “Insiders” in the United States (1970) 33 M.L.R. 34; Brudney &
Clark, A New Look at Corporate Opportunities (1981) 94 Harv. L. Rev. 998 and
Hammond, supra, note 17.
34 Compare the following cases. Canada: Canadian Aero Services Ltdv. O’Malley [ 1974]
S.C.R. 592; Peso Silver Mines Ltd v. Cropper [ 1966 ] S.C.R. 673; Abbey Glenn Property
Corp. v. Stumborg (1978) 9 A.R. 234 (S.C. App. Div.), motion for leave to appeal to S.C.C.
refused 29 June 1978, 11 A.R. 270; Hawrelakv. The City of Edmonton [ 1976 ]1 S.C.R. 387.
The United Kingdom: Regal (Hastings) Ltd v. Gulliver[ 1967 ] 2 A.C. 134 (H.L.), [ 1942 ] 1
All E.R. 378; Boardman v. Phipps [ 1967] 2 A.C. 46 (H.L.). Industrial Development
Consultants Ltdv. Cooley [ 1972] 1 W.L.R. 443 (Assizes). The United States: Robinson v.
Brier 194 A. 2d 204 (Pa. 1963); Franco v. J.D. Streett & Co. 360 S.W. 2d 597 (Mo. 1962);
Gaynor v. Buckley 203 F. Supp. 620 (D. D.Or.); Irving Trust Co. v. Deutsch 73 F. 2d 121
(2d Cir. 1934).
1981]
PROPERTY RIGHTS TO INFORMATION
from a business opportunity which comes to his knowledge while he is a
director of the company, the issue in English and Australasian35 courts is a
relatively simple one: was he, at the relevant time, standing in a fiduciary
relationship to the company ? If so, a rigorous “no conflict” rule applies and
the only question left is that of the appropriate remedy. In short, the battle is
largely won or lost on the issue of whether the defendant stood in a fiduciary
relationship to the plaintiff.
American and Canadian courts, in corporate opportunity cases, have
embarked on an excursion into the analogue of a conversion action, except
that the excursion is clothed in the rhetoric of equity. Starting with an
affirmation of the fiduciary status of the defendant, and paying lip service to
the rigour of the incidents which attend that classification, North American
courts have often suggested that the prospective business opportunity which
was taken “belongs” to the plaintiff. The opportunity so appropriated is
treated as a conceptualized economic good: either it is property or it is
something which could reasonably have been expected to ripen into a
property interest. 36 Having thus apprehended the matter, and the lid of
Pandora’s box having been opened, these jurisdictions have then inevitably
been tempted to hear submissions in mitigation since taking some things is
apparently more reprehensible than taking others! Thus the fiduciary
standard is subverted and a variable standard of liability is introduced.
This approach may mask some ambivalence concerning
the
appropriateness of the fiduciary standard in the contemporary corporate
world. The “property” approach may also be related to the problem of
remedies: the practice of treating what was “taken” as “property” rather
than categorizing it as reprehensible behaviour is used to justify attaching a
constructive trust to the subject matter of the opportunity37 rather than
leaving the plaintiff to a personal remedy.
All of this has an air of unreality about it. Some courts have said that the
defendant’s actions amounted to a breach of a relational duty; on similar
facts, others will assert that a proprietary right has been infringed. It is
apparent that the famous Holmes dictum in Masland38 would also bear
Winns Ltd [ 1975 ] 2 N.S.W.L.R. 666 (C.A.).
35 Coleman v. Myers [ 1977] 2 N.Z.L.R. 225 (C.A.) and Winthrop Investments Ltd v.
36 See the cases cited supra, note 34. English courts have occasionally adopted this
approach. See, e.g., Bell Houses Ltd v. City Wall Properties Ltd[ 1966 ] 2 Q.B. 656 (C.A.),
where the chairman of the board’s knowledge, acquired in the course of administering the
company, was held to be a company asset. In Boardman v. Phipps, supra, note 34, members
of the House of Lords held different opinions on whether information should be regarded as
property in the eyes of equity. See, in particular, Lord Hodson’sjudgment at p. 107 and Lord
Upjohn’s judgment at p. 127.
37 See J. R. Canion v. Texas Cycle Supply, Inc. 537 S.W. 2d 510 (Tex. Civ. App. 1976).
38 Supra, note 20, 102. Mr Justice Holmes said : “Whether the plaintiffs have any valuable
secret or not the defendant knows the facts, whatever they are, through a special confidence
REVUE DE DROIT DE McGILL
[Vol. 27
repetition in this area of the law. While it may be true, as a distinguished
English legal historian has suggested, that “equity has proved that from the
materials of obligation you can counterfeit the phenomena of property”, 39
the converse argument is also sustainable. Property theory had proved that
from its incidents you can fashion all the obligations of equity. Or, more
likely, in this area of the law neither proposition is totally accurate, for what
is being applied stands in terms of the “explanation” of property herein
before proffered.40 Equity and property have merged.’
C. Freedom of information legislation
Democratic theory posits a “right to know” about the workings of gov-
ernment, presumably as part of a wider concern with the accountability of
elected representatives. It is one thing to hold that value ; it is another to find
an adequate legal concept to accommodate the concerns which need to be
addressed. Legislation of this kind in fact raises acute “property” issues. 42 If it
is asserted that the government is the greatest repository of information and
that all citizens have in general a right of access to this information, it
amounts to saying that the information is public property. This in turn might
afford a basis for standing to sue. It might also afford a basis for the
exemptions which would necessarily have to be created. For example, it is
routine in the course of licencing and trade applications for private firms to
disclose relevant trade and financial data to a particular government
department. The empowering statute, or regulations made thereunder,
typically require such disclosure. Will the information thus disclosed become
public property? Clearly it should not, and freedom of information
legislation usually recognizes that competitors are not entitled to gain access
that he accepted. The property may be denied but the confidence cannot be. Therefore the
starting point for the present matter is not property or due process of law, but that the
defendant stood in confidential relations with the plaintiffs.”
39S. Milsom, Historical Foundations of the Common Law, 2d ed. (1980), 6.
40 See supra, II. Problems in the ascription of property rights to information.
41 Compare the differences of opinion which have emerged in recent years in the British
Commonwealth over “mere equities”. See, e.g., Wallace & Grbich, A Judge’s Guide to Legal
Change in Property: Mere Equities Critically Examined (1979) 3 U.N.S.W.L.J. 175.
42 See Freedom of Information Act of 1967, 5 U.S.C. 552 (1976). An Act to enact the
Access to Information Act and the Privacy Act, to amend the Federal Court Act and the
Canada Evidence Act, and to amend certain other Acts in consequence thereof Bill C-43
(1980) Ist Sess., 32d Pan. received its first reading in the House of Commons on 17 July
1980. The essential scheme of the Canadian Act (Schedule I) will permit citizens and
permanent residents (s. 4) to obtain recorded information under the control of a government
institution (s. 6) after payment of a fee (s. 11). If a department refuses to comply, a
complainant can carry the matter to an Information Commissioner (s. 31). The proposed
Act contains broad exemptions against disclosure of information which could injure
national security and safety (see ss. 13-8) or which will disclose personal information (s. 19)
as defined in Schedule II. For a discussion of the proposed Canadian and the existing U.S.
legislation, see J. McCamus, Freedom of Information, Canadian Perspectives (1981).
1981]
PROPERTY RIGHTS TO INFORMATION
to this information and hence destroy the applicant’s competitive edge.
Without this ability to retain some degree of exclusivity, commerce would
face a disincentive to do business with the government.
Yet whatever the benefits, in terms of political theory, there are in
treating information in government hands as public property, new kinds of
problems will arise. A good deal of the information will have economic
value. Thus governments enacting this type of legislation will likely face two
types of property claims : first, claims emanating from those who want access
to the information for private gain, and second, claims from those persons
who oppose
it would constitute
competition to the private sector. Faced with those kinds of claims, tribunals
exercising delegated authority can either make a series of ad hoc decisions
which might or might not eventually create a coherent response, or evolve at
the outset a policy which has some integrity. 43 In this area it is impossible to
evolve legal responses to such claims except in terms of a theory of
“relational equity”.
the release of information because
D. Criminal law and information related offences
From the standpoint of economics, crimes against “property” might be
viewed as straightforward “transfers” or rearrangements of purchasing
power that do not directly consume any resources. A conventional lawful
transfer involves a small administrative cost relative to the total value of the
transfer, while in the case of a criminal transfer the size of the transfer is a
crude measure of the total amount of resources used to achieve criminal
revenues. Thus “the function of the criminal law, viewed from an economic
standpoint, is to impose additional costs on unlawful conduct where the
43 in the United States, these kinds of difficulties have already caused acute concern. See
Chrysler Corporation v. Brown 441 U.S. 281
(1979) and, Connelly, Secrets and
Smokescreens: A Legal and Economic Analysis of Government Disclosures of Business
Data (1981) Wis. L. Rev. 207.
The U.S. Freedom of Information Act of 1967,5 U.S.C. 552 (1976), has been severely
criticized because it has been used as an instrument of industrial espionage rather than as a
means of opening government operations to public scrutiny. See Hearings on H.R. 11192
before the Subcom., on Science, Research and Technology, 95th Cong., 2d Sess. 73 (1975)
(Statement of Arthur R. Whale).
McGarity and Shapiro point out that “private regulatees… have successfully
forestalled most efforts by agencies and interested citizens to disclose their contents by
claiming that health and safety data are statutorily protected ‘trade secrets'”, in The Trade
Secret Status of Health and Safety Testing Information: Reforming Agency Disclosure
Policies (1980) 93 Harv. L. Rev. 837, 837-8. See also Steinbach, Note, A Procedahal
Framework for the Disclosure of Business Records Under the Freedom of Information Act
(1980) 90 Yale L.J. 400; Smith, Note, The Fiduciary Duty of Former Government
Employees (1980) 90 Yale L.J. 189 (discussing the U.S. Ethics in Government Act of 1978,
18 U.S.C. 207 (Supp. III 1979)).
McGILL LA W JOURNAL
[Vol. 27
conventional damages remedy alone would be insufficient to limit that
conduct to the efficient level”. 44
The pervasiveness of information related problems has extended beyond
civil law in the areas of private and public law: more criminal sanctions
against appropriation of information are being enacted.45 The results have
been paradoxical. First, the thesis that property is necessarily associated with
“things” has been substantially weakened. Second,
the notion that
information can and will be legally protected has received the imprimatur of
the criminal law and this seems to have reinforced, at least in the United
States, the notion that trade secrets are proprietary in character. It may be
demonstrable that the civil law protection of information based on ethical
principles declined as the criminal law began to address more directly the
idea of information as property for the purposes of that body of law. 46
The three most serious problems which have arisen have concerned:
(a) the redefinition of theft,
(b) the problem of information stored in an electronic impulse, and
(c) theft of services.
The common law definition of theft, i.e., the permanent deprivation of a
tangible object, has proved hopelessly
inadequate. Most American
jurisdictions began undertaking amendments either to criminal codes or
enacting specific criminal trade-secret provisions from 1964 onwards. 47 In
the United Kingdom, under The Theft Act, 1968, “‘Property’ [now]
includes money and all other property real or personal, including things in
action and other intangible property”.48 On the second limb of the offence –
Punishment: An Economic Approach (1968) 76 J. Pol. Econ. 169.
4R. Posner, Economic Analysis of Law, 2d ed. (1977), 163. See also Becker, Crime and
45 See C. Tapper, Computer Law (1978), in particular, chap. 4, “Computer Crime”; R.
Bigelow & S. Nycum, Your ComputerandtheLaw(1975) ;and Vandevoort, Trade Secrets:
Protecting a Very Special “Property” (1970-71) 26 Bus. Law. 681.
46 Fetterley advances a different thesis, i.e., that criminal trade secret laws are generally
used by the world leader in technology to preserve its lead over the rest of the world.
Historical Perspectives on Criminal Laws Relating to the Theft of Trade Secrets (1970)25
Bus. Law. 1535, 1538.
47 Tapper, supra, note 45.
48 Theft Act, 1968, c. 60, s. 4 (1) (U.K.) [emphasis added ]. The Act was preceded by a
report of the Criminal Law Revision Committee: Theft and Related Offences, Cmnd 2977,
(1966). In the debate in the House of Lords, Lord Wilberforce suggested “business secrets”
fell within the scope of the definition. House of Lords Debates, Vol. 259, col. 1309. But in
Oxford v. Moss [ 1979 ] Crim. Law Rev. 119 (Q.B.) it was held that the “acquiring” of an
examination paper by a student and the “information” contained therein did not come
within s. 4. The commentary to the case report states, “[t]here is no difference in principle
between trade secrets and the examination questions and the decision may be taken to settle
that trade secrets cannot be stolen”, ibid., 120. See also, Tettenborn, Stealing Information
(1979) 129 New Law J. 967; Zegas, Personal Letters: A Dilemma for Copyright and
Privacy Law (1980) 33 Rutgers L. Rev. 134; Hammond, supra, note 15.
1981]
PROPERTY RIGHTS TO INFORMATION
the United Kingdom statute attempted to
permanent deprivation-
address the problem 49 but the particular section still seems to be addressed to
a tangible object.
With regard to the second problem concerning information stored in
electronic impulses which exist for only a moment in time, there seems no
reason in principle why improper interception of or interference with such an
impulse could not be subjected to criminal sanctions. However, few
jurisdictions have yet made the necessary legislative adjustments.
Theft of services was not recognized by the common law until recently.
The American Model Penal Code does contain provisions aimed at this
area,50 and the major American industrial states have adopted these
provisions.
It seems that a decision will soon have to be made by the commonwealth
jurisdictions on how to handle offences of dishonesty or misuse in relation to
information. 51 Given that economies will increasingly become information-
based, those proscriptions are likely to reinforce the expansion of the
concept of property.
In Scallen v. The Queen (1974) 15 C.C.C. (2d) 441 (B.C.C.A.), it was held that the
definition of theft in s. 283 (1) (a) of the Criminal Code R.S.C. 1970, c. 34 was broad enough
to include intangibles. In particular, see the opinion of Bull J.A. at pp. 471-4. The Supreme
Court of Canada held in R. v. McLaughlin (1980) 113 D.L.R. (3d) 386 that the improper
appropriation of computer programmes did not amount to theft. However, the Court’s
opinion was based on the narrow, technical ground that the improper use did not involve use
of a “telecommunication facility” as required by s. 287 (1) (b) of the Code.
49 Theft Act, 1981, c. 60, s. 6(1).
50 American Law Institute, Model Penal Code, 223.7.
51 The extent of the problem in Canada is still a matter for speculation. It has been
suggested that the “average theft runs from $450 –
600,000 all the way up to $1.5 million”.
See Robinson, Law Outdistanced by Technology, The Financial Post, 30 May 1981,24, col.
3. The same article quotes John Carroll, Professor of Computer Science at the University of
illegal actions against
Western Ontario as suggesting that “1,065-1773
computers… will occur in 1981, with the higher end of the range the stronger probability.”
Illegal actions are in this case defined to include the theft of service time, hardware or
software. Another “seven to ten” times that number of crimes are said to go unreported.
A private member’s Bill containing an expanded version of the definition of property
“so that computers and their integral elements such as magnetic tapes, programs, and data
are included in the offences against property” has been introduced into the House of
Commons. See An Act to Amend the Criminal Code, Bill C-628, (1980-81) 1st Sess. 32d
Par]. (1st reading). Like most private members’ Bills, its fate is uncertain.
(detected)
Quite apart from the availability of a suitable offence, there are pragmatic difficulties
involved in criminal proscription in this area of the law : difficulties of proof, embarrassment
on the part of the complainant in admitting that a security operation has been breached, and
the risk of disclosure in open court of vital corporate information. These kinds of problems
have exacerbated the movement into contractual and trade secret protection.
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Conclusions
“Too large a generalisation leads to mere barreness. It is the large
limited by a happy particularity, which is the fruitful
generalization,
conception.”5 2 Given the importance of the question in contemporary high-
technology societies, it is important that some attempt be made at accurate
generalization with respect to the questions: is information “property” for
some or all legal purposes ? Should it be? What kind of property is it ? Yet
there are apparently intractable obstacles which inhibit adequate responses
by the courts. Judges use loose terminology, there are diversities of
jurisdiction, and the economic facts vary widely from case to case.
A rational conceptual structure seems far distant at this time. It would
conceivably be possible to take solace in “justice”. The judiciary somehow
manages to solve individual cases, usually by shrewdly applied appraisals of
the real intent of parties and legislatures, a good deal of common sense and a
straightforward arrogation of the privilege and duty of doing justice
regardless of technicalities and the duplicity of words. But if the essence of
justice consists in getting to the merits of an individual case, the essence of
law consists in even-handedness, and without a rational structure that larger
end may remain distant. The ultimate task of compromising justice and law
is then subverted.
This preliminary survey suggests that the level of intellectual abstraction
employed by the courts is of a low order. The cases do not yield any insights
of real significance for policy-makers or theorists, but solve particular
disputes in relatively crude terms.
Nevertheless, this article might suggest at least tentative conclusions and
some avenues for further investigation above the level of individual law suits.
Some of these observations are necessarily, in the absence of further detailed
field studies, at the level of “heroic generalizations”.
(1) It is trite learning that the conception of property has not been a
static one in western legal and economic systems. Agrarian economies, in
which the prevailing low level of economic activity was consistent with and
actively fostered a notion of absolute property rights, have come and gone.53
The industrial age adopted an instrumental view of property: it sanctioned
and abetted the gods of productive use and development. Hence, exclusive
property rights overtook absolutist notions, as a reward for perceived
“good” economic behaviour. The result was not the exhaustion or
52 A.N. Whitehead, Science and the Modern World (1925), 46.
53See Horwitz, The Transformation in the Conception of Property in American Law,
1780-1860(1972-73)40 U. Chi. L. Rev. 248;J. Hurst, Law and Social Order in the United
States (1977), in particular chap. III, “Science, Technology and Public Policy”; R. Tawney,
The Acquisitive Society (1920); Danzig, Hadley v. Baxendale: A Study in the
Industrialization of the Law (1975) 4 J. Leg. Studies 249.
1981]
PROPERTY RIGHTS TO INFORMATION
replacement of the prior learning, but rather the creation of a coarse, layering
effect.
(2) The analytical construct of a post-industrial state is not yet
anywhere a physical reality, although first-world countries are increasingly
seeking to attain that status. The value of the construct is that it raises a
perspective against which the adequacy of present day legal and economic
thinking can be tested.
(3) It is not yet apparent what the prevailing conception of property
rights will be in a post-industrial state and what effect that will have on the
layering process which has heretofore accompanied the development of
western legal systems. But this much at least is clear: the law is presently
hung-over and economic theory is hung-up. The law still overtly encourages
development and exclusivity in the growth of information. At the same time
it exhibits much less concern for access to, and usage of, that information. At
the domestic, corporate, national and international level the law abets
retention of information. 54 Economic theory seems uncertain how to
respond to the construct of an information-based economy because it
challenges traditional free-market analysis.
(4) The employment of proprietary theory with respect to information
could have adverse consequences for society. For example:
(a) It may result in a “locking up” of information for private advantage.
Even in pure economic terms this must be counterproductive since
information begets information.
(b) A less than appropriate concern for the moral dimensions of the law
may be engendered. Ideas are the common heritage of mankind.55 Reliance
on the market, which necessarily posits the existence of exclusionary rights
to information, to produce adequate social accommodations to new know-
ledge is terribly hazardous when so many of the proposed uses of such know-
ledge may destroy basic human values, i.e., privacy, human dignity and the
physical quality of human life as affected by the new genetics, and,
democratic values as they are subverted by an increasingly technocratic
bureaucracy.
(c) At a more abstract level, such an approach can involve a return to an
attitude obsessed with creating “things” around which “rules” can be hung.
54The degree to which the law encourages the retention of information varies. Trade
secrets are very strictly protected. Yet the Patent Act R.S.C. 1970, c. P-4, ss. 67-8 and the
Copyright Act R.S.C. 1970, c. C-30, s. 14 provide for compulsory licencing when the
‘property’ is not utilized. Patents are often supported by know-how agreements. Unless the
expertise can be obtained, access to the patent is commercially useless.
55,[T] he female law student may have had a healthier reaction to insider trading than her
professor when she stamped her foot and declaimed, ‘I don’t care; it’s just not right'”. Loss,
supra, note 33, 37.
McGILL LA W JOURNAL
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It must be asked whether such a regression is useful and consistent with the
prevailing relational concept of property which has evolved in response to
present day concerns with respect to the environment, resources and land use
planning. Is such reasoning consistent with the tendency –
already
apparent in the common law jurisdictions –
to separate social function
from property ? Private property is increasingly tending to lose, or is being
stripped of, its social purpose, i.e., protection of labour in the Lockean sense,
or reward for risk, in favour of function alone. The inexorable logic of such a
thesis is that property loses its moral claim to reward.
(5) The most obvious advantages of applying exclusionary property
theories to information are that:
(a) From a legal perspective, it brings into play an available body of
doctrine. This “advantage” must be qualified : the existing body of doctrine
may or may not yield or be capable of yielding results which are considered
appropriate.
(b) It enables the commercial handling of information. For instance,
licencing of know-how is not possible unless there is some “thing” to be
licenced.
(6) These considerations should evoke some caution before traditional
proprietary concepts are blandly applied to information ordering or
information related disputes. It may be that in this area lawyers and
economists will not be capable of successfully passing off old wine in new
jugs. The problems of addressing the real needs of the polity in an
information-sodden world may require new ways of thinking. In the
quantum movement to a post-industrial world, the distance that both
lawyers and economists have to travel in their thinking may be analogous to
the shift from Newtonian physics to quantum physics. In that strange sub-
atomic half world of psychoenergetic systems, physical things are “not a
structure built out of independently existing unanalyzable entities, but rather
a web of relationships between elements whose meanings arise wholly from
their relationships to the whole”. 56
56 See also Stapp, S. Matrix Interpretation of Quantum Theory (197 1) Physical Rev. D3,
1303, 1308; Einstein, On Physical Reality (1936) Franklin Institute J. 349; N. Bohr, Atomic
Theory and Human Knowledge (1958); W. Heisenberg, Physics and Philosophy: The
Revolution in Modem Science (1958).
The common notion that the law evolves slowly and painfully is not always an accurate
one. In legal history it is possible to find periods of sharp, almost quantum leaps forward. In
the mid-eighteenth century, for example, a series of cases concerned with the protection of
literary property held that property rights were not natural rights or absolute in character.
Professor P. Atiyah has recently noted that at that time “property suffered its first major
defeat.” See Atiyah, The Rise and Fall of Freedom of Contract (1979), 107-9. See also B.
Kaplan, An Unhurried View of Copyright (1967), in particular, chap. I “The First Three
Hundred and Fifty Years”.
1981]
PROPERTY RIGHTS TO INFORMATION
(7) A starting point for a quantum shift in perspective with respect to
information would involve the realisation that information is not necessarily
a private good.
In traditional North American market-oriented thinking, which has
been utterly dominated by transactions between private producers and
consumers, information is viewed by economists and jurists as a commodity.
Such a perspective creates the possibilities of information handling as an
industry in its own right, and the sort of infrastructure posited by Porat,56a
and urged by Thompson in Canada.57 But if information is instead conceived
of as a resource, then its characteristic as a collective good would lead to
quite different approaches with respect to the production and distribution of
information in society.
A legal system would then have to address questions such as –
how
should this resource be allocated in order to respond to social requirements
and individual needs ? Who controls and retains power over this resource ?
Which policies, structures and rules are the most adequate
in this
perspective ?
Choices will have to be made between these two alternative perspectives.
Or, perhaps the issue could be more accurately seen as being –
in what
circumstances should the emphasis be on one or the other.58 If the
election is in favour of the collective good approach then it will be necessary
to explore more fully whether co-operative legal and economic strategies
could realistically be adopted to encourage both creativity and dissemination
of useful information. Reference has already been made in this connection to
the failure of commentators
in the
Commonwealth concerning the. comparative merits and demerits of the
various statutory monopolies versus trade-secret protection in adjusting the
trade-off between incentives to create and incentives to use new information.
to generate any real dialectic
56a Porat, supra, note 2.
57 Thompson, supra, note 2. Thompson is concerned with the apparent disparityf between
the potentiality of an information society and its realization. He argues that the intensive
“first order” impact of innovation is operating smoothly, but extensive “transformative
interactions” are not. The reason is that “there seem to be fundamental demand constraints
based on our centuries old experience in the trade of goods and our dedication to the
application of industrial technology”, ibid., viii. He correctly notes the economic difficulties
in classifying information as a public or private good, but then argues strongly for the
creation of private good “information markets”.
Thompson is probably correct in asserting that some, as yet imperfectly understood,
constraints are at work. This article has raised the possibility that the institution of private
property itself may be the critical constrai!e. And Thompson seems to give quite insufficient
consideration to the probability tha4ti “in the final analysis, while companies may
occasionally publish data as a contribution to scientific knowledge, much data will be kept
secret out of economic self-interest”. See McGarity & Shapiro, supra, note 43, 848.
58 See E. Ploman & L. Hamilton, Copyright: Intellectual Property in the Information Age
(1980), 213 et seq.
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[Vol. 27
There is no published material in Canada which compares each of those
avenues with the third possibility of direct government financing. This is
surprising since the cost of serving additional users is negligible in the cases of
some of the information which falls within the ambit of one of the statutory
monopolies, so that a high price which discourages use
is socially
undesirable. 59 However, a very low price is likely to be incompatible with
recovery of initial investment outlays for its development. When this is a
significant consideration 60 then neither copyright nor trade-secret protection
will be in the public interest, for both operate via the extraction of prices high
enough to bring a return that will attract private investment. In that kind of
case,
if the investment in the product is worthwhile to society but
compensatory pricing is not, then the only other present alternative is
government financing. Even if another method of making such an
investment financially attractive to private industry were to be conceived, it
would, by definition, be no more satisfactory than the use of copyright or
reliance on trade-secret protection.
Thus, in the marketing of individual goods a competitive strategy still
makes some sense. But this article has stressed that information by its very
nature is a collective good. Designing a strategy for the optimal social
investment in knowledge may therefore need to be “co-operative” and a
thorough discussion of both government
financing and any other
alternatives in Canada is a pressing priority. This should involve critical
analyses of how societal units other than the private market can more
effectively produce and disseminate knowledge –
either in tandem with the
private sector, or on their own account –
and how to “price” that informa-
tion and knowledge for users. Admittedly this task is predominantly one for
economic theorists – but lawyers have an important role to play since
ultimately a balance has to be struck in law between private advantage and
public gain.61
Progress (1980) 11 I.I.C. 563.
60 On this point see Baumol & Ordover, On the Optimality of Public-Goods Pricing with
59 See Beier, The Significance of the Patent System for Technical, Economic & Social
Exclusion Devices, (1977) 30 Kyklos (Fasc. 1) 5-21.
61 Since this article was written, further studies have come to hand. (1980) 9 J. of Legal
Studies, is devoted to the proceedings of a conference entitled “The Law and Economics of
Privacy”. See, in particular, Kitch, The Law and Economics of Rights in Valuable
Information, 683, the Comment thereon by Carlton, 725, and Gould, Privacy and the
Economics of Information, 827. See also R. Posner, The Economics of Justice (1980), 232;
W. Cornish, Intellectual Property: Patents, Copyright Trademarks and Allied Rights
(1981); Brooks, Social and Technical Inventions: Challenges to Legal and Political
Institutions (1981) 22 IDEA: The Journal of Law and Technology 138. In the area of breach
of confidence, see Talbot v. General Television Corporation Pty Ltd[ 1981 ] R.P.C. I (S.C.
Vict.).