Handbook on Law, Innovation and Growth
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Handbook on Law, Innovation and Growth

Edited by Robert E. Litan

A central goal of any economy is to achieve rapid and sustained growth. This cannot happen without continued innovation. This landmark Handbook brings together many of the world’s legal scholars to examine features of the legal infrastructure that affect both innovation and growth. Individual chapters explore different legal subject areas, in most cases offering recommendations for rule changes that could accelerate growth, primarily in the context of the US economy. The introductory chapter provides a framework for these discussions and explains why it is time for legal scholarship and research to move in that direction.
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Chapter 7: Torts and Innovation

Gideon Parchomovsky and Alex Stein


* Gideon Parchomovsky and Alex Stein 7.1 INTRODUCTION Innovation is a key determinant of wellbeing and economic growth.1 Academic discussions of innovation are typically confined to the domains of patent and trade secret law. This chapter highlights a previously underappreciated connection between innovation and tort law. It seeks to expose and analyse the cost the current design of our tort system imposes on innovation. The main thesis of the chapter 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...

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