NARRATOR: Thanks for joining this episode of the No. 86 lecture series, where we discuss the foundational principles of acquisition in Property Law, as well as current topics in the academic literature (such as intellectual property). Today’s episode features Donald Kochan, Professor of Law and Deputy Executive Director of the Law and Economics Center at Antonin Scalia Law School. As always, the Federalist Society takes no position on particular legal or public policy issues; all expressions of opinion are those of the speaker. PUBLIUS: How many different types of property are there? Do the different types of property entail different rights of ownership? DONALD KOCHAN: there are three principle categories of property. The first is real property or land and your first year property course is principally going to focus on that category. Real property law governs the relationships between landowners. It governs the acquisition of land. It governs the estates in land and the overall ways in which those rights are regulated in an actual physical dirt, sometimes real property is called dirt law in the sense that we're talking really about the part of the earth and the structures on it that we interact with just about every day. In addition to real property, we have personal property, which is referred to in the law as chattel. Personal property are things like the clothes you're wearing or the books that you're reading, or the shoes that you have on, or the car that you're driving. So these are things which are the kinds of items which we call property and have the attributes of ownership, but are not land. And then there are those intangible things which fall into the category of intellectual property. And so copyrights, patents, trademarks, and the like, are all part of intellectual property which is about those things which you can't physically touch, but we nonetheless want to give the attributes of ownership to, including the rights to exclusivity that come with real property and personal property. Property rights is a term that can take on a variety of definitions and a variety of characteristics, but property rights are those rights you have against the rest of the world. They are those things that come with the ownership of property. Oftentimes, the first thing that we talk about in property is the right to acquire a property. And one of the things that is important about a system of governance is that it gives an equal right of all individuals to acquire a property, that is, each of us can go out and do what's necessary to acquire property, and there's no privileged class. It's not that only men can acquire property or only women can acquire property, it's not that only the rich can acquire property or the poor can acquire property. The idea of having a free and open system of exchange of private property means that anyone can acquire it without mention of any status without any need to prove any status in order to do so. That acquisition is what then gets you into the category of owners. So we have acquisition prerequisites, which then once you've acquired property in one of the legally recognized ways, then you now become an owner of that property which entitles you to the rights thereafter. So there are rights to acquire property, and then there are property rights after. And the property rights once you've acquired and gain ownership, are first and foremost, you gain the attribute of the right to exclude others from that property. So you are now the owner against the rest of the world. And you hold this dominion, this despotic dominion in a way in which you can tell everyone else to stay away. Now, why can you do that? It is because of that concept of exclusivity, and it comes with the idea that there can only be one owner of property. Now, that sometime is confusing because you can have co-ownership, you and your partner might own it, you and your spouse might own the property, you and a friend could own property together. You are considered one owner. What I mean by one owner, is that, one owner or group of owners that agree to purchase or own as a group against the rest the world. Again, we have this individualized nature of property in that ownership. Once you are considered the owner of property and can exclude all others then that gives you the right to keep that property. No one can take it away from you, and if they try to, you can ask the government to exercise their fundamental responsibility to protect you from that kind of plunder. But what it also means is that you have a right to refuse to sell the property. It is now yours. You can use it as you wish. No one can tell you how to use it. The right to keep the property means that even if someone else could use it better, unless they purchase it from you, and unless you agree to sell it, it remains yours. So you have a right to refuse to sell and to refuse to sell for a good reason, a bad reason or no reason at all, because it's yours and it's yours to do with as you wish. If you want to paint it in a hideous color of some hideous shade of pink, it is yours to do that if you wish because it's yours and no one can say, "Well, we believe that someone else should own this house because they're going to take better care of it." No. You have the right to keep it and the right to refuse to sell even for silly reasons. Now, in addition to the right to keep it then you also have the right to use it while you have it. And so, you get to use the property in any way, again, any way that does not harm another. So the property rights include the right to use the property as you see fit and that maximizes your own personal welfare. And so, if you choose to use the property in any legal way, now of course, there's always regulations out there that might tell you, you might be zoned where you can't actually build a coal plant, it's a coal-fired power plant in a place where only houses can be built. So there will always be that overlay of regulations, but so long as you are not running afoul of some other regulatory limitation you have the right to use it as you wish. In addition to the right to use then, and the right to keep, which are things while you retain ownership, as the owner you have the right to alienate the property. And by alienate, we mean, you have the right to sell, transfer or gift away the property. In other words, you have the right to give the property to another, either in exchange for money or simply because you wish to gift it away. So you have the right to alienate it to others. And then, you also have the right to decide I don't want this property anymore. So you have the right to abandon it, at least personal property you have the right to abandon. It's very difficult to abandon real property, however, and so this is where one of the distinctions comes in. The law does not recognize your ability to abandon your real property, because real property comes with certain obligations like paying taxes. There's a potential for third-party injuries on your property if they come on. We need to know who to hold liable for that piece of real property. And so, we don't allow most real property to be abandoned except for servitudes. But you can abandon personal property. You can go to the trash can and throw out your soda, right? Into the trash. You can decide that you no longer want the clothes that you're wearing. You can throw those out, you can abandon things which you no longer wish to have. And then, there's a right to destroy, even something that's valuable. It is your right to do it, you don't have to use property, it is that you have the ability as much to use it as to destroy it, so that no one can use it. And again, some of these things all come with limitations, but those are the principal sort of rights categories that you get in the property rights bundle. PUBLIUS: So disposing of personal property can be easy. What about acquiring property? Can you talk about some of the ways that people come to own property in the first place? DONALD KOCHAN: So one of the things that the law gives us, is it gives us rules for acquiring property and thereafter, legally recognized entitlements to ownership that don't require brute force, and come later with legal protection. One of the things that was wanting in the state of nature was rules governing acquisition of property. And as such, it became the mightiest and strongest that could take from the weakest. You would have plundering in society. And so, one of the things that the state of nature wanted for, was any protection against one person taking from another. And then, you have one person take from another, and then a third person can come and take from the second person, and a fourth person can come and take from the third person and no one has any kind of stability or security, and there is nothing truly owned. It is only held and possessed in the state of nature, and it is only held and possessed up until the point that it is taken away by someone else. And so, the only security you have in holding onto your possessions in the state of nature is a hope that you will be stronger than the plunderer who comes knocking at your door trying to take it away. So what the law gives us, is a sense of stability that if you follow the rules of acquiring property, we will recognize you as the owner thereafter, and as a consequence of being recognized as the owner, you will be entitled to the protection of the government against plunderers. And so we have a vast improvement upon the state of nature in which the government now becomes the protector of those rights to property that you did not have when it was simply about possession for a limited period of time, so long as you could keep it against the stronger individuals. So what are some of the ways that you can acquire a property? Well, there is completely unowned and never before owned property. So things in which there have never been property rights held by anyone else, this is known as acquisition by discovery. Discovery is discovery of completely unowned things and the law has come to recognize that the first to discover will be the one who can make claim to own that property. Now, there's very little that is left to discover out in the world that has never before owned, perhaps the creation of certain islands out of volcanoes, involve property which is yet to be discovered and claimed by any individual. But discovery really is about conquest and the idea that the first to discover the property becomes the one who can make claim to that property and own it against the rest of the world. Another way to acquire property similar to acquisition by discovery, is acquisition by capture. So acquisition by discovery is about acquiring principally land which has never before been owned and never before been claimed by any other individual. And as such the first claimant becomes the owner. We do this in discovery because we want people who discover property to thereafter be able to exclude others for all the well-ordered society benefits that we've talked about in other segments of this program. That is if you could not make claim and gain property rights in that what you discovered, there would be constant battles over individuals who came upon that land later. PUBLIUS: What are other situations that can arise with property? Discovering unowned land is pretty uncommon…. But what if you find a piece of property (land or otherwise) that doesn’t have a clear owner? DONALD KOCHAN: Well, find is a different situation than discovery or capture because discovery and capture were things acquired that were never previously owned. Whereas, acquisition by find is when you find property, there is a prior owner. And find is a very important category because it helps us understand relativity of title. It helps us understand when we want to create a kind of property right, even if it's not an absolute property right against everyone in the world. It might be property rights against a significant portion of the world. Let me explain. Acquisition by find of lost property means that the first finder of lost property will be given the status of essentially the owner. Will be entitled to possession of that property against everyone in the world except the true owner. So the first finder of property is entitled to possession against the entire world except for the true owner. This is an important lesson in property, because what it means, is that we don't allow you to lose your property rights very easily. If you are clumsy and you happen to drop your iPhone on the floor as you're leaving class, we don't presume that you abandoned that iPhone. We don't even punish you for being clumsy for losing your iPhone. And so, we allow you to keep your rights to that iPhone, despite the fact that you have been dispossessed of the iPhone by your own losing of it. So you are still the true owner, we don't take that away from you when you lose property, but we don't want the iPhone to just sit on the floor. We want it to be reintroduced into commerce, so the true owner can eventually find it. I mean, you may not know where you actually dropped it, and it's going to be difficult to find it at all. In addition, we want lost items to not go just laying on the ground, but we want to incentivize people to actually use lost items if no true owner comes to claim them, so that we don't have just resources that lay unused. It would not be socially optimal to have resources that are lost never get reintroduced into commerce or into use. And so, what we do is we incentivize first finders by saying that at least the common law rule, is that the first finder has rights against the rest of the world, except for the true owner. So they get to continue using the property and until the true owner comes knocking on the door, they will keep it. Now, the find rules are often changed by statutes. So one of the things about acquisition by find is that we have a common law rule, but oftentimes we have statutory rules, particularly state and municipal rules, which define the rights of finders of lost property. One of the interesting ways that these statutes alter the common law is that they often say that if you report that you found lost property, we will give you an opportunity to be become the owner, not just the priority owner against all, but the true owner, to actually dispossess the true owner. What happens there is that under these statutes, you find a very valuable watch or an iPhone, if you report it to the police, the statutes often say that if the true owner doesn't come and claim it within a certain period of time, then the true owner does lose their rights and the finder becomes the absolute owner of the property. This is a way to encourage finders to actually report lost items. To create a repository, a centralized place where those who lose their property can go and try and find it, and encourages this reporting because there's a benefit that's gained from actually reporting it, and that is that, over time you could become the true owner of the property. Now, there's acquisition by find of lost property, there's also acquisition by find of abandoned property. If someone has abandoned property, then they have given up their claim to ownership to it. We reward those who are first in time, in a lot of property rules. And so, the first in time to find abandoned property becomes the true owner. Why? Because the owner, the previous owner, has now relinquished their rights to it. They've said, I hereby abandoned this. So if I go and throw my iPhone into the trash, rather than drop it on my way out of class, but instead in the trash, I say, "I am done with this company. I'm never using their phones again. I hereby relinquish all rights to this property and I throw it into the trash." I have now abandoned that property and have relinquished my rights and claims to that property. So the first person [replace with “to find”] that and reduce it into their dominion can now become the absolute owner of the property, and the true owner does not have a claim. So we need to distinguish between acquisition by find of lost property, in which you, relativity of title, makes you the highest priority owner if you're the first finder. Except for the true owner, versus finder of abandoned property in which there is no true owner any longer. And so, it really becomes much more like discovery in that sense. PUBLIUS: What if, instead of throwing away your iPhone, you decided to give it to someone directly? What kind of rules govern acquisition by gift? DONALD KOCHAN: You may also acquire property rights by being gifted property. We presume in the law, against gift. We presume people don't actually like to give other people things. And so acquisition by gift comes with a high hurdle of proof in order to prove that you were actually gifted an item. And if you were, however, that means that the prior owner, the giver, is giving up their rights and the recipient becomes the new owner. Now, as a consequence of this need for proof. In other words, anyone could claim, "Well, I have it because that person gifted it to me." That's a hard... I mean, if you're already in court and someone is challenging whether this was gifted, that means that the owner of the thing is claiming that they didn't actually gift it. So we need some way to resolve those kinds of disputes, and so acquisition by gift requires a high level proof which requires intent, delivery and acceptance, three elements. So the owner had to intend to give it as a gift, and that will need to be proven. There has to be delivery, and physical delivery as you will learn is usually required that you must physically deliver the gift that you wish to give. That has a high indicia of gift giving intent. That is, if I hand over my watch, that's an evidence that I intended to give my watch. The fact that the person possesses my watch does not include any indicia that they got the watch through some kind of physical transfer from the owner to now the recipient. And as such, we're a little suspicious about those things which are not manually delivered. So if you want to give a gift and you want it to be validly recognized by the law, you need to make sure that it is actually physically delivered, manually delivered, from one person to another, in order to have that legally enforceable. Remember this next time a holiday comes around or a birthday in which you are giving a gift by mail, it may not actually be legally enforceable. Then finally there has to be acceptance. In property law, we will certainly spoil most of your sentimental occasions by talking to you about the legal rules that must apply in order for your sentimental occasions to actually have legal validity. So in addition to intent and delivery, there also must be acceptance. Now, some people are confused about the acceptance requirement and acquisition by a gift, but it really is because sometimes people give you things you don't want to accept. Now, most of the time when that happens it's something that you didn't really want then you can just throw it away, or you can give it away to a thrift store or to a charity, but other times it's harder for you to actually abandon the thing you were given. So imagine if someone gave you an old plot. They gave you a piece of land that used to have a gas station on it. Guess what, you've now been gifted a whole lot of liability, because if you become the owner of a previously owned gas station, the law actually makes you as an owner responsible for all the contamination that now exists below that land. And you will have a legal responsibility to clean up. If there is any pollution underneath your land, now that you are the owner, you take on responsibilities, legal liabilities, as a result of owning that thing. Now that's an extreme example, but there's a lot of things which you might own, which also come with legal responsibilities, including paying taxes on them if you receive them as a gift and otherwise. And so there are some things which you may not want to accept as a gift. So we don't allow people to just dispose of their liabilities by saying, you know what? I don't want to pay for the cleanup of this gas station, of this old gas station and the pollution. Contamination that exists below this land, so I'm just going to gift it to my brother and make him pay for it. We don't allow that if the brother doesn't accept that responsibility, so with gifts comes responsibilities and as such, we require acceptance for a gift to be valid. PUBLIUS: All of these types of acquisition that we’ve discussed are somewhat out of the ordinary. What about basic everyday transactions as a way to acquire property? DONALD KOCHAN: In addition to acquisition by discovery, and by capture, and by find, and by gift there is just the traditional acquisition by transfer. This is probably the most common way in which both personal property and real property are acquired, and that is, you go to a store and you pay the apple store for your computer. You go to the grocery store and the grocery store transfers you their ownership and the apples into your basket and you pay for them and now they become your apples. This is the way in which most things are acquired. Most properties are acquired by purchasing it within a marketplace where one owner is selling to a buyer, the buyer then becomes the owner, the prior owner loses all rights to that. In other words, the grocery store can't show up and, and now eat that apple out of your refrigerator. They might be trespassing on your property itself which is a whole another problem, but they also have no claim to the apple anymore once you've purchase that apple. So acquisition by transfer by, by sale is probably the most common way in which property is acquired. And the last one that we'll talk about for right now, is acquisition by adverse possession. Acquisition by adverse possession is a strange one because it's a non-consensual transfer of property. We worry that some property will remain unused in society. There are very few utilitarian rules which allow for the transfer from one private person to another without their consent simply because it has higher utility in the hands of a second person than it did in the first owner. Most of the time, our system does not allow one person to be dispossessed based on a claim that the other person can use the property better. We don't allow for that kind of demand that you transfer your property to someone else. You have really rich soil in your backyard, and you are not growing a garden. The person who is really good at growing gardens, who could benefit from using your really rich soil cannot come and tell the government, "They're not using their rich soil. I can use this property better. This property could be worth 10 times what it is, if that rich soil were being exploited, and so, government, you should force that person to sell this property to me, or even worse, government, you should take that property from this person not gardening in the backyard and give it to me because I can garden and make it better," right? A situation in which a company comes in and says, I can build a manufacturing plant on this property, and it will be much better for the rest of society, if I build a manufacturing plant, than these modest homes of these individuals who aren't really contributing that much in tax revenue or being all that beneficial. I can hire a lot of people, I can contribute to tax revenue, government, you should take from them and give it to me because I can use it better. Generally, that's prohibited too. The standards under the takings clause to prohibit that kind of activity have weakened over the years, but at least theoretically, those kinds of private to private transfers based on a rationale that one person can use it better than the other are not allowed or illegitimate and unconstitutional. And as such, you can't normally acquire property that way. Adverse possession is the only thing that we recognize close to allowing that kind of private to private transfer. What it says is that an individual who enters upon the land of another has the ability to over time acquire property rights to that property if the owner does not do certain things within a period of time. They must enter the land, they must make actual entry upon the land of another. They must have indicia of adversity. That is that they must make claims to the property, adverse to the claims of the actual owner, and they must do so, for a substantial period of time, in most jurisdictions, it's five or 10 years. And at any point in time, the actual owner can do very little and reset their clock, to oust them, and make their attempted claim inoperable. So it's very hard to adversely possess property and really it only works when the actual owner has been given a lot of opportunity to keep their property and to prevent the adverse possession from happening, and the actual owner just doesn't come through and do any of those things. At that point in time, there's different rationale that can be given. Some people say, "Well, they've earned it. Other people have said, "Well, the other people have actually just slept on their rights, and so they deserve to lose their property." So there's different rationale, but adverse possession is another way to acquire property. PUBLIUS: Is it possible to create property or is all property attained by acquisition? DONALD KOCHAN: The final thing, the final way to acquire a property is not really acquisition at all, but it's a way in which property rights are generated, is through creation. And so we recognize that you may create something out of nothing. And at that point, your labor in and of itself makes it your own. And so, you are entitled to retain the fruits of your labor, and so by creating something you now can call it your own. It's an extension of yourself, and so creation can be of personal property, things that, you know the ceramic bowl that you make in your backyard or the furniture that you built, these are all things which you acquired the parts but your creation itself becomes your own too, because it is a matter of the extension of the self, the work that you put into it and the labor. Sometimes when you’re talking about personal property, it’s really because you own the component parts, but we want to reward that kind of labor that you put into things. Probably more importantly on the creation side, is intellectual property. And that is, that we allowed the creations that come from our intellectual endeavors, from our minds, from our creativity to receive the status of property and to get the kinds of protection including from exclusivity rules that prevent others from invading upon our intellectual creations. And so, intellectual property is really about the acquisition of those rights that flow after you can be claimed as the inventor, as the creator of these ideas, as the thinker of the ideas, as the writer that gets the copyright, as the inventor that gets the patent. And we want to reward creativity. We want to incentivize creativity. One of the key reasons to give people property rights in the first place is to incentivize behavior that we think is beneficial for society. And so, when we want to create intellectual property, it's because we want to incentivize people to to use creativity in their minds to come up with great ideas and to put those ideas out there... If we didn't give property rights, people would be afraid to share. They would be afraid to share those ideas with the rest of the world, out of fear that others would be able to gain from them, and you would not be able to have some of the benefits, the concentrated benefits of your own creations. And so, that's why we protect intellectual property. One of the great examples I like to teach in my first year property course is about the Mining Law of 1872, and the story of incentives that exists as a result of it. Prior to 1872, there were vast swathes of land owned by the United States, particularly, in the Western part of the United States. We knew that these were mineral rich lands. There were a lot of great hard rock minerals out there. These were valuable hard rock minerals, and if they could be extracted from the ground, they could contribute to commerce, they can contribute to the economy, we would be able to do great things with these rich mineral resources. But they're not valuable if they're left in the ground. So how do we get them out of the ground and into the marketplace? Well, this is one of those times when government can actually be beneficial by creating property rights, by incentivizing property acquisition in a way that required really the government to do it. And it required some kind of government facilitation of the promotion of property rights for this to happen. So what happened, is in the Mining Law of 1872, the first thing that they did, was they said, "Well, people, this is government land. So the first thing we need to do, is we need to give private individuals permission to go upon the government land." So the first thing was, rights, basically, licenses and easement type rights to go upon the land and not be called a trespasser. So you could go upon public lands for a limited scope. The scope was to search for hard rock minerals. And so this removed the barrier to people going on the land and starting to try to find these mineral resources. Of course, now why you going to go on the land and search for these resources? And you're going to call up the government and say, "Hey, I found really valuable resources. I'm sure you'll thank me later." People won't be incentivized to go actually search for those resources unless they get something out of their activity. They need to have the fruits of their labor protected. So to incentivize people to actually do the searching for the hard rock minerals, the government, thereafter granted rights to once you've found them, you could stake a claim. At which point you also would then become the owner of those minerals. At a very minimum a fee for filing the claim, you became the owner of the minerals. In other words, they created property rights in those. Now, what they also said is that you also have the right to mine and to extract the minerals. So they gave them permission to come in and dig out the minerals, take them away as their own. This incentivize the activity where it otherwise would not have ever occurred, and hard rock minerals were thereafter found and introduced into commerce, it was the creation of the property rights, the ability to actually own the things which you found, which incentivized the labor to go out and find them, the removal of the barriers of trespass by allowing people the right to go and search for these things on people's property. And it did it all while only giving limited rights and the governments could retain the rights to the surface of the rest of these lands which they wanted to retain for other purposes, conservation and others. And so in many ways, this is a lesson in incentives and lesson in way in which the creation of property rights can encourage an activity which would otherwise never occur. PUBLIUS: What about intellectual property? Is that created? DONALD KOCHAN: Intellectual property has its foundations, not just in creation but also in discovery principles. One of the reasons why discoverers of real property were entitled to obtain ownership interest in that which they discovered, one was out of necessity. It's better to pick one owner than to have things unowned. So we need to figure out who should be that owner. But another was because the creation of property rights in an activity incentivizes the activity. We want to incentivize people to discover new lands because once they're discovered they can be cultivated in ways that will be beneficial for all of society. So we encourage people to go out and discover lands, explorers were encouraged because they could retain the fruits of some of the labor they put into efforts toward discovery. A very similar story can be told with intellectual property. We want people to discover new ideas. We want them to put labor into thinking and working hard at discovering new things, new ideas, new inventions, new creations, new combinations, and in order to encourage and incentivize that activity, we say, if you put your time, effort and mental energy into those kinds of activities, you'll be rewarded in the end. You'll be rewarded by owning the thing that you discovered and being able to thereafter extract value out of the thing that you discovered. And to make a claim against the rest of the world that discovered a thing, which many of you could have discovered too, is mine, and I have certain rights against the rest of the world in relation to it because I discovered it first. NARRATOR: Thank you for listening to this episode of the No. 86 Lecture series on Property Law. The spirit of debate of our Founding Fathers animates all of the No. 86 content, encouraging discussion and critical reflection relative to how each subject is widely understood and taught in law schools and among law students. Subscribe to the No. 86 Lecture series on your favorite podcast platform to have each episode delivered the moment it’s released. You can also go to fedsoc.org/no86 for lectures and videos on Federalism, Separation of Powers, the Judiciary and more. Thanks for listening. See you in class!