Palsgraf, Principles of Tort Law, and the Persistent Need for Common-Law Judgment, Perhaps Even on IP Infringement

This short paper explains how two time-honored principles of tort law - proximate cause and culpability - might clarify and rationalize the law of secondary liability for intellectual-property (IP) infringement. It begins by analyzing how Judge Cardozo's classic opinion in Palsgraf used these principles to chart an intermediate course between intentional and strict liability. It then seeks to apply the same approach to IP cases, in which direct liability is strict, but secondary liability involves culpability. Using the recent cases of Tiffany v. eBay and Perfect 10 v. VISA as examples, it analyzes how these principles might apply, respectively, to an on-line auctioneer's secondary liability for third parties' sales of counterfeits and a credit-card service's secondary liability for Internet sales of infringing images. In the process, it suggests that reverting to tort-law basics could simplify and shorten both analyses and judicial opinions in IP cases and perhaps produce more sensible results, in part by introducing economic principles like the least-cost avoider. It concludes with some observations about the recent progress in federal-common-law analysis of other IP issues and its potential to revivify an increasingly rigid and formalistic approach to fields of law outside IP