Charles Caleb Colton (1780-1832), reverend and aphorist, wrote that "[i]mitation is the sincerest of flattery." How true.
A February 24 commentary in The Wall Street Journal, by Robert E. Litan, says that "it is the innovators who matter most." Also true. But Mr. Litan goes on to prescribe an interesting couple of ways to encourage development of new goods and services: by curbing "frivolous" litigation through adoption of "the ‘English rule’ — loser pays — on attorneys’ fees for litigation with commercial parties on both sides" and by "limiting the award of punitive damages where defendants have complied with prevailing regulatory standards."
At first blush, Blawgletter perceives imitation more than innovation in Mr. Litan’s litigation proscriptions. The sensation persists on second blush. For the English rule already prevails in most lawsuits "with commercial parties on both sides" — such as disputes about which business breached a contract — and judges and juries routinely take compliance with regulations into account when deciding whether (and how much) to punish reprehensible conduct.
Perhaps Blawgletter has misunderestimated Mr. Litan. But if he means that "loser pays" should apply as a matter of course to securities, antitrust, patent, copyright, and other "commercial" spats, he has even less of a claim to innovation. Enemies of change have long advocated penalizing those who use litigation to alter the status quo but who, for technical reasons, fall short of the goal. America departed from the English rule for the same reason we rebelled from English imperialism — and for the same reason innovators do a world of good: the status quo (and its imitation) hinders realization of human potential.
Much the same goes for Mr. Litan’s proposal to limit punitive damages (in a way he doesn’t describe) if a product satisfies "prevailing regulatory standards." Why would we give a safe harbor to a product because a government bureaucracy doesn’t realize (or ignores) its dangers?
Blawgletter’s heart swells with pride in American innovators and innovation. And we totally agree with Mr. Litan’s thesis that entrepreneurship drives progress. Too bad, then, that he adopts the arguments of the powerful in hopes of protecting the weak.
