11998 Robert Heidt

Professor of Law, Indiana University at Bloomington.

2. Biotechnology refers to any technique to modify the products of living organisms. Examples include hybridoma and recombinant DNA technology. Hybridoma technology entails the fusion of two types of cells, an antibody-producing B lymphocyte and a certain tumor cell line (i.e., a myeloma). See U.S. CONGRESS, OFFICE OF TECHNOLOGY ASSESSMENT, NEW DEVELOPMENTS IN BIOTECHNOLOGY: OWNERSHIP OF HUMAN TISSUES AND CELLS - SPECIAL REPORT, OTA-BA-337, 31-58 (1987) [hereinafter OTA REPORT]. The resulting immortal hybrid cells, called hybridomas, secrete large amounts of monoclonal antibodies and lymphokines. Because of their exquisite specificity and reduced toxicity, these molecules may help in the treatment of a spectrum of diseases. Recombinant DNA technology (also known as genetic engineering) entails the insertion of genes into microorganisms (typically bacteria) that will express a desired protein which can then be purified. Id.

3. Throughout this article, in order to clarify the party being discussed, the researcher is referred to by the impersonal pronoun and the subject by the personal pronoun.

4. For the sake of brevity, the subject's "consent" refers both to the subject's consent that his samples be used for the research and commercial purposes of the researcher, and to the subject's assignment of all his interests in the cell lines and end products developed from his samples to the researcher.

With research governed by the guidelines of the Protection of Human Subjects issued by the Department of Health and Human Services, subjects may not be able to waive their interests in their cells because of the existing ban on the use of exculpatory language in consent agreements. See 45 C.F.R. 46.116 (1998). Because the purpose of that ban was to preserve a subject's right to sue should he be injured during the research, this impairment of the subject's ability to aid research by clarifying the researcher's rights seems unfortunate. See Hearings: The Use of Human Biological Materials in the Development of Biomedical Products 233 (October 29, 1985) (statement of Dr. Charles R. McCarthy, Director, Office for Protection From Research Risks, National Institute of Health).

5. Individuals with valuable cells are found disproportionately among members of isolated groups. See OTA REPORT, supra note 1, at 54-56. Examples of such groups include the Guyami tribe of northwest Panama (cells useful in retarding the progress of AIDS), the Hugahai tribe in Papua New Guinea (cells useful in combating leukemia) and a remote community in the Sudan (cells useful in avoiding heart disease). See Philip L. Bereano, Patent Pending: The Race to Own DNA-Guaymi Tribe Was Surprised to Discover They Were Invented, THE SEATTLE TIMES, Aug. 27, 1995, at B5; Patent Blather: Biotechnology, THE ECONOMIST, Nov. 25, 1995, at 87; Linda Marsa, Whose Ideas Are They Anyway: Intellectual Property in the Information Age, OMNI, Dec. 22, 1995, at 36.

6. Examples of successful end products of biotechnology include: EPO, which prevents anemia during kidney dialysis; Neupogen, which decreases the risk of infection during chemotherapy; and Acromegaly, which aids growth. See generally Sandra Cuttler, The Food & Drug Administration Regulation of Genetically Engineered Human Drugs, 1 J. PHARMACY & L. 191 (1992).

7. "[B]iological materials involved [in commercial biotechnology] are almost always replenishable and often constitute waste materials, at least from the point of view of the donor." Arthur L. Caplan, Blood, Sweat, Tears and Profits: The Ethics of the Sale and Use of Patient Derived Materials in Biomedicine, 33 CLINICAL RESEARCH 448, 450 (1985).

8. The probability of maintaining a cell line from a given sample is low. Even with strict adherence to nutrient and temperature requirements, established cell lines can not always be maintained. Contamination and damage during storage is the most common culprit. Interview with Dr. Derrick Stempel of Massachusetts General Hospital (Oct. 3, 1996).

One simplifying assumption throughout this article is that the researcher, perhaps because of its failure to maintain the cell line, is unable to obtain any patent.

9. See Ahern v. Scholz, 85 F.3d 774, 792-94 (1st Cir. 1996); see also Haberman v. Greenspan, 368 N.Y.S.2d 717, 720 (1975); RESTATEMENT (SECOND) OF CONTRACTS 162 (1979).

10. See Procter & Gamble Co. v. Bankers Trust Company, 925 F. Supp. 1270, 1289 (D. Ohio 1996).

11. See RESTATEMENT (SECOND) OF TORTS 525 (1974); see also WILLIAM PROSSER, LAW OF TORTS 105-06 (6th ed. 1994).

12. See supra note 8.

13. See, e.g., Shannon v. Russell, 203 B.R. 303, 311-12 (Bankr. S.D. Cal 1996) (reiterating the doctrines of fraud and misrepresentation in a non-dischargeability action); Kahn v. Flood, 550 F.2d 784 (2d Cir. 1977) (perjury invalidates evidence obtained with a search warrant); IND. CODE 6-3-11 (1997) (criminal liability for submitting false statements on tax returns); NEW YORK PENAL LAW 210.00 (McKinney 1997) (felony to commit perjury during testimony before a court).

One reason fraud is undesirable is because it increases the amount of misinformation in the market and therefore reduces the market's ability to allocate resources efficiently. See Michael R. Darby & Edi Karni, Free Competition and the Optimal Amount of Fraud, 16 J.L. & ECON. 67 (1973).

14. I do not claim that the dilemma faced by the returning researcher in the story presented rises to the level of a pressing social problem. The stylized story primarily provides a convenient context for applying economic principles. Nevertheless, the Office of Technology has found that uncertainty about how courts will resolve various claims by subjects against researchers who have profited from the subject's cells presents the single greatest obstacle to continuing developments in biotechnology. See OTA REPORT, supra note 1, at 58. Moreover, previous discussion of the subject's claims has largely ignored the need to preserve the researcher's incentive to search. See, e.g., Roy Hardiman, Comment, Toward the Right of Commerciality: Recognizing Property Rights in the Commercial Value of Human Tissue, 34 UCLA L. REV. 207 (1986); Richard Delgado & Helen Leskovac, Informed Consent in Human Experimentation: Bridging the Gap Between Ethical Thought and Current Practice, 34 UCLA L. REV. 67 (1986).

15. This discussion assumes the suspicious subject can find some way to assess the value of his samples while still retaining his control over the use of the samples for research and commercial purposes. For this assumption to be true, some laboratory, testing service, or research institution must be able to assess the cells' value in return for compensation and must also be willing to refrain from using the cells itself.

16. The subject's hold-up problem would not destroy the incentive to search if that search gave the researcher a decisive head start in developing and marketing the end products over the rival companies with which the knowledgeable subject might eventually decide to deal. Just as the need for patent protection is most acute when research is difficult but imitation easy, the need for the right to lie is most acute when the search for valuable cells is difficult but the development of the end products from those cells relatively easy.

17. The subject's threat must be taken seriously even when the researcher has a patent on the cell line derived from the subject's cells. This is because of the severe practical problems of enforcing the patent once an infringer has obtained access to the cell line. See Alan J. Lemin, Patenting Microorganisms: Threats to Openness, in OWNING SCIENTIFIC AND TECHNICAL INFORMATION 196 (Vivian Weil & John Snapper eds., 1989).

18. Of course, society would not want the researcher to search when the expected costs of searching (primarily the costs to the researcher and to the subjects) exceed the expected social value of the search-the latter being the social value of a successful search discounted by the chance the search will not succeed. But as long as the costs of searching are internalized on the searcher, society can rely on the searcher's self-interest to assure that searches which are not cost-justified are not undertaken. The need for the searcher to compensate the subject for his voluntary participation, or to induce that voluntary participation some other way, internalizes the subject's costs of allowing the search unto the searcher. In short, the danger here is not too many searches but too few.

19. Like patents the proposed right to lie subjects the key information, here that this subject's cells are valuable, to the researcher's exclusive control. Assuming the demand curve for the information is negatively sloped, exclusive control imposes some allocative or dead weight loss. Here, for instance, the information once discovered would be most efficiently used if it was distributed to all biotechnology companies, the marginal benefits of distribution clearly exceeding the marginal costs. The dead weight loss primarily consists of the foregone gain from more widespread use of this information. See Frank Easterbrook, Insider Trading, Secret Agents, Evidentiary Privilege and the Production of Information, 1981 SUP. CT. REV. 309, 313. The case for patents and property rights hinges on the assumption that the gains to society from improved incentives exceed this short-term allocative loss which all quasi-rents create. But see Edmund W. Kitch, The Nature and Function of the Patent System, 20 J.L. & ECON. 265, 275-80 (1977) (calling for patent protection whenever the information sought is valuable and costly to acquire). Here the social gain from more widespread use of the information seems modest in part because the searching researcher's exclusive possession of the information gives it a powerful incentive to exploit that information vigorously by developing and marketing the end product itself or by transferring the information to some company who can.

20. The National Organ Transfer Act [hereinafter NOTA], 42 U.S.C. 274(e) (1988), and its state complements, which condemn the sale of body parts, might seem to condemn the subject who attempted the holdup as well. But even if the transaction for the right to collect cells was deemed a sale of the subject's cells, NOTA would not apply. The Act expressly exempts the sale of replenishable tissues such as blood or sperm. In addition, NOTA may only forbid sales for transplantation, rather than research, purposes.

21. If the appropriation fails because the researcher denies reason to believe the cells valuable, the subject by asking will at least set up the researcher for a later suit should the cells prove valuable. Given that asking is costless to the subject, that should be reason enough to ask.

22. The verb, "to incent," while not formally established grammar, enjoys an increasingly accepted status in various industries. The author uses it here because he feels that it most accurately captures the concept he intends to convey. Eds.

23. See Anthony T. Kronman, Mistake, Disclosure and the Law of Contracts, 7 J. LEGAL STUD. 1 (1978); see also Victor Brudney, Insiders, Outsiders and Informational Advantages under the Federal Securities Laws, 93 HARV. L. REV. 322, 339-43, 371-76 (1979).

24. 15 U.S. (2 Wheat.) 178 (1817).

25. Id. at 186.

26. Id. Kronman was offering an explanation for why courts did not require disclosure in some mistake cases. See Kronman, supra note 22. However the modern trend is to require disclosure in all such cases. See RESTATEMENT (SECOND) OF CONTRACTS 153 (1979).

Kronman's model better explains the rationale courts should be using when they refuse to require disclosure than the rationale courts actually use in such cases. Other models, such as the contractarian model suggested by Professor Scheppele, better explain the rationales courts actually use. See KIM L. SCHEPPELE, LEGAL SECRETS 124 (1988).

27. 1 O.R. 469, 492-93 (1969); see also Holly Hill Lumber Co. v. McCoy, 23 S.E.2d 372 (S.C. 1942); Simpson Timber Company v. Palmberg Construction Co., 377 F.2d 380 (9th Cir. 1967).

28. See, e.g., CHARLES FRIED, CONTRACT AS PROMISE 82-84 (1981).

29. See Laidlaw, 15 U.S. (2 Wheat.) at 178; see also In re Verifone Securities Litigation, 784 F. Supp. 1471 (N.D. Cal. 1992).

30. See Files v. Brown, 124 F. 133 (8th Cir. 1903).

31. In Laidlaw, Chief Justice Marshall emphasized in dictum that while nondisclosure was permitted, more active measures to mislead, such as a lie, would not be. Laidlaw, 15 U.S. at 195. Mere silence in the face of the ignorant party's question may even have been fraudulent.

32. See Saul Levmore, Securities and Secrets: Insider Trading and the Law of Contracts, 68 VA. L. REV. 117, 139-41 (1982).

33. Granted, a refusal to answer may not arouse the subject's suspicions as much if the researcher has clearly warned the subject from the start that it will never provide feedback about the value of a subject's cells. See infra notes 57-58 and accompanying text.

34. Courts have been willing to stretch the law to avoid severe hold-up problems in other contexts. See generally RICHARD A. EPSTEIN, SIMPLE RULES IN A COMPLEX WORLD 122 (1995) (denying injunction to resident whose property is polluted by manufacturer).

The power of eminent domain illustrates that the wish to avoid hold-up problems sometimes justifies coercion. Indeed some may feel allowing the researcher to use coercion to obtain a further collection no more odious than allowing it to lie. But while both coercion and lying trigger moral objections, lying seems a less serious offense. The lie still preserves the subject's control over whether he will allow a further collection in return for the nominal compensation offered. The lie merely removes the possibility of significant financial gain as a factor in the subject's decision.

In this context giving the researcher the right to force the subject to provide a further collection (i.e., a private right of eminent domain) will not avoid hold-up problems as successfully a right to lie. For if the exercise of the right to eminent domain alerts the subject to the value of his cells, he will be able to hold up the researcher for payment in return for promising to refrain from providing collections to the researcher's rivals. See infra notes 57-58 and accompanying text.

35. The costs of creating and administering property or contract rights in information often need to be incurred only because the information whose production society wishes to incent could not be kept secret in fact. One who develops a trade secret, say, has no need for any legal protection if he can actually keep what he has developed a secret. The law of trade secrets comes into play only when actual secrecy can no longer be maintained. Thus, laws that help an actor keep his information secret in the first place may economize on the costs of laws that are needed only after secrecy is lost. Here, keeping the subject free from any suspicion that his cells have proven valuable avoids all the costs of granting property rights or contractual rights in the key information.

36. Formal property rights in information can be granted through tort doctrines such as unfair competition as well as through trade secret and copyright law.

37. See, e.g., RICHARD POSNER, ANTITRUST LAW: AN ECONOMIC PERSPECTIVE (1976).

38. See, e.g., Fashion Originators Guild of America v. Federal Trade Commission, 312 U.S. 457 (1941) (self-help effort to avoid style piracy condemned as violation of the Sherman Act). In contrast, the courts of England are more inclined to view these self-help efforts favorably. See Robert Heidt, Populist & Economic v. Feudal: Approaches to Industry Self-Regulation in the United States and England, 34 MCGILL L.J. 39, 50 (1989).

39. See OTA REPORT, supra note 1, at 52.

40. Moore v. Regents of the University of California, 793 P.2d 479 (Cal. 1990), cert. denied, 499 U.S. 936 (1991). This famous case was brought by a cancer patient against his doctor and his doctor's associates and employer. See id. at 480. In his treatment of the plaintiff over a course of years, the defendant doctor never alerted the plaintiff to the doctor's research interest in the plaintiff's tissues nor did he obtain the plaintiff's consent to any research or commercial use of those tissues. See id. at 481. The plaintiff was allowed to believe the tissues were taken solely for therapeutic purposes whereas in fact some tissues were taken solely for research purposes. See id. In a dramatic and widely publicized opinion the California Court of Appeals found that the defendant's research constituted the tort of conversion, entitling plaintiff to a share of the revenues from the end products of that research. See Moore v. Board of Regents of University of California, 249 Cal. Rptr. 494, 504 (Cal. Ct. App. 1988), rev'd, 793 P.2d 479 (Cal. 1990), cert. denied, 499 U.S. 936 (1991). In reversing, the California Supreme Court denied plaintiff's claim for a share of the revenues from the end products. See Moore, 793 P.2d at 479. But the court held that the doctor, as part of his obligation under the informed consent doctrine, needed to disclose his research interest in any treatment he was recommending. Id. at 484-85.

41. See generally Valerio Barrad, Genetic Information and Property Theory, 87 N.W.U. L. REV. 1037, 1083 (1993).

42. See JACQUES BARZUN, BURKE & HARE: THE RESURRECTION MEN (1974).

43. Alan J. Lemin, Patenting Microorganisms: Threats to Openness, in OWNING SCIENTIFIC AND TECHNICAL INFORMATION 196 (Vivian Weil & John Snapper eds., 1989).

44. Perhaps the surest way for the researcher to avoid the holdup would be to collect enough cells during the initial collection so that extra cells could be stored against the possibility that the cell line could not be maintained. The researcher could then recreate the cell line from the stored supply if necessary, and the subject need never be contacted.

Although certain types of cells are more fragile than others, most samples can be frozen and stored. And the survival rate when they are thawed, and recovery attempted, can approach 95%. See OTA REPORT, supra note 1, at 53.

45. Of course, a researcher who insists that its subjects promise to allow not just the immediate collection but future ones as well will predictably persuade fewer subjects to participate.

46. Telling the subject the truth will still enable the subject to exercise the second holdup, namely, "Pay me or I'll tell your rivals what you've learned and allow collections by them." Even if the original agreement contained an enforceable provision barring the subject from allowing collections by others, the subject's threat to allow such collections sub rosa would certainly be credible. Whether explicit or implicit, those threats create a risk for the researcher that it can never eliminate entirely once the subject knows the truth. The wish to avoid this second holdup gives the researcher ample reason to lie despite its contractual protection. For further discussion on the danger presented by the second holdup, see infra text accompanying notes 50-52.

47. See E. ALLEN FARNSWORTH, CONTRACTS 12.7, at 836 (2d. ed. 1990).

48. Even if courts do everything within their power to force the subject to allow a further collection, a practical researcher must consider the possibility of the knowledgeable subject flouting the courts' orders by fleeing to another jurisdiction or going into hiding. The knowledgeable subject may hope the researcher stands to gain enough from his cells that it will quickly offer financial payment rather than endure delays or risks or incur enforcement costs.

49. See Leitch Gold Mines, Ltd. v. Texas Gulf Sulfur, 1 O.R. 469 (1969).

50. See J.P. ALLENBRIGHT, THE TEN DOLLAR WILDCAT 20-24 (1979).

51. The assumption here is that once the knowledgeable subject allows collection by the researcher's rivals and tells those rivals what he knows about the value and characteristics of his cells, the rivals will not face significantly greater costs in exploiting the cells than would the original researcher. Without this assumption, the original researcher may not be hurt by the subject dealing with its rivals. If-to take the extreme case-all rents arise not from the cells' unique characteristics but from the researcher's unique knowledge about how to exploit the cells, giving the cells to rivals would not enable them to compete.

52. See JACK HIRSHLEIFER, PRICE THEORY AND APPLICATION 296 (3d ed. 1984).

53. A bilateral monopoly is an example of strategic behavior, the particular focus of game theory. See ERIK RASMUSEN, GAMES AND INFORMATION: AN INTRODUCTION TO GAME THEORY (1989). Bilateral monopolies also present the danger that the resource in question-here the cells-will not be transferred to the higher valued use because the parties in attempting to establish their reputation for hard bargaining will never reach agreement. The social loss when, for this reason, no researcher uses the subject's cells is acute.

54. A feature of the science involved here may aid our researcher. For when helpful cells are found in one individual, they are also typically found in at least some of the individual's relatives. This plurality of sources could undermine the ability of any one of them to exercise a holdup. The researcher's stumbling block now becomes the possibility of collusion among knowledgeable sources. For once one source learns of the value of his cells, his interest lies in contacting his relatives and warning them against allowing any collections. If the relatives all heed this advice and collude with each other, the researcher's dilemma remains as before. Its negotiations with the sources should proceed just as they would if there was a single source.

55. For example, no court will enjoin a subject from allowing collections by medical personnel if therapeutic reasons call for those collections. Nor will a court compel the subject to obtain a contractual promise from those medical personnel not to use the collections for research or commercial purposes. Barring the subject from allowing collections by others, including other researchers, would change prevailing practices and annoy the many subjects who want to work with others. Such a ban, of course, would be unnecessary if the key information is kept secret.

56. See CAL. BUS. & PROF. CODE 16600 (West 1995) (contracts restricting an employee from engaging in a lawful profession, trade, or business are to that extent void); RESTATEMENT (SECOND) OF CONTRACTS 186 (1979); E. ALLAN FARNSWORTH, CONTRACTS 5.3, at 16-17 (3d ed. 1992). Commentators have pointed out some of the legitimate purposes which restrictive covenants serve but which courts have overlooked. See Edmund W. Kitch, The Law & Economics of Rights in Valuable Information, 9 J. LEGAL STUD. 683 (1980) (employment restraints, although generally unenforceable, assist companies in financing the training of employees and in enforcing trade secret laws); Paul H. Rubin & Peter Shedd, Human Capital and Covenants Not to Compete, 10 J. LEGAL STUD. 93 (1981) (occupational and geographic restrictions on the seller of a business, although often unenforceable, encourage the development of good will).

57. See E. ALLAN FARNSWORTH, CONTRACTS 12.7, at 836, 869 (2d ed. 1990).

58. No doubt the revenue sharing agreement could be structured to link the subject's future gains to the researcher's. But while a carefully structured agreement might reduce the subject's temptation to deal with rivals, some temptation will remain as long as the subject can keep his dealings with rivals secret. This research will now suffer from the incentives for inefficient behavior created by divided ownership. See RICHARD POSNER, ECONOMIC ANALYSIS OF LAW 82-83 (5th ed. 1995).

59. Revenue sharing also makes more sense in the oilman/farmer context because the farmer who sells his mineral rights while retaining his fields will learn eventually that his fields contain oil, whereas the subject is much less likely ever to learn of the value of his cells. The farmer's knowledge of the oil's presence may put him in position even at that point in time to harm the oilman's operations through, for example, noncooperation or sabotage. Thus the oilman may feel compelled to obtain the farmer's continuing cooperation, a goal achieved by the revenue sharing agreement. In other words the oilman may need to resort to revenue sharing because it is not able to adopt, as a practical matter, the self-help remedy available to the researcher, namely, keeping the subject permanently in the dark.

60. See Kronman, supra note 22, at 6.

61. See id. at 23.

62. See Diamond v. Chakrabarty, 447 U.S. 303 (1980) (the mere fact that subject matter is "living" does not render it unpatentable).

63. Harold Demsetz has offered the classic explanation of how technological changes that increase the value of certain resources call for legal changes designed to better incent the development of those resources. One such legal change is the recognition of new property rights. See Harold Demsetz, Toward a Theory of Property Rights, AEA PAPERS AND PROCEEDINGS (May 1967).

64. 248 U.S. 215 (1918).

65. See id. at 237.

66. See Armen Alchian & Harold Demsetz, Some Economics of Property Rights, 30 IL POLITICO 816 (1965); Armen Alchian & Harold Demsetz, Production, Information Cost, and Economic Organization, 62 AM. ECON. REV. 777 (1972); Douglass C. North, The Rise and Fall of the Manorial System: A Theoretical Model, 30 J. ECON. HIST. 777 (1971).

67. See International News, 248 U.S. at 222.

68. See Kronman, supra note 22, at 11.

69. See id. at 13.

70. Another example of a low cost searcher would be one who learns the key information-the value of this subject's cells-by eavesdropping or by industrial espionage.

71. See Kronman, supra note 22, at 14. To be sure, just as the eavesdropper at least incurs the cost of eavesdropping, the lucky researcher has incurred the cost of ascertaining the cells' value. And compelling truthfulness will prevent the eavesdropper and researcher respectively from recouping those costs, thus creating a disincentive for them to incur those costs in the first place. This is a greater concern with the researcher than with the eavesdropper just because ascertaining the value of cells plainly carries greater social value than eavesdropping.

The facts of Moore v. Regents of the University of California , 793 P.2d 479, 480-83 (Cal. 1990), cert. denied, 499 U.S. 936 (1991) suggest the problem. There, a cancer patient, Moore, presented a melon-sized diseased spleen which his doctor, the primary defendant, surgically removed and from which the doctor maintained a cell line of considerable value. The issue discussed here did not arise because the doctor had not obtained Moore's consent to the use of his tissues for research and commercial purposes at the time the tissues were taken. But if Moore had consented, the doctor/researcher had thereafter returned to Moore for further tissues, and Moore had asked the key question, should the doctor have been allowed to lie about the value of Moore's cells? The fact that the doctor came into possession of the cells almost costlessly, indeed almost fortuitously, suggests not. On the other hand, the fact that the doctor had undertaken significant efforts to ascertain the value of the cells, the benefits of which Moore could appropriate if he knew the full truth, suggests the lie should be allowed.

The more precise question then is not whether the researcher's search was costly but whether the researcher has undertaken any costly and socially valuable efforts the benefits of which the subject will be able to appropriate, and the incentive for which will be destroyed, if the subject is told the truth.

72. See Isaac Ehrlich & Richard A. Posner, An Economic Analysis of Legal Rulemaking, 3 J. LEGAL STUD. 257 (1974) (case by case assessments often less efficient than reliance on blanket rule based on cruder indicia which serve as proxies).

73. See, e.g., Janet K. Smith & Richard L. Smith, Contract Law, Mutual Mistake, and Incentive to Produce and Disclose Information, 19 J. LEGAL STUD. 467, 470 (1990); ROBERT COOTER & TOM ULEN, LAW AND ECONOMICS (2d ed. 1997).

74. Barring the remote chance that the subject has undergone a conversion since the original collection, the subject is not someone who for religious or other personal reasons strongly opposes the drawing of his blood or any participation in research. Were that the case, the subject would feel his cells were more highly valued in a use other than research. Of course a subject recently converted to an anti-research view remains free to refuse a second collection.

75. In other words, the agreement to allow the second collection creates significant gains from trade, despite the subject's ignorance of the value of his cells. The researcher's lie only affects the terms of that agreement, not the ultimate use of the cells.

76. The allocative effect of a lie will rarely be so insignificant. False information about the value of securities, for example, moves the price away from the accurate price and thereby inflicts a deleterious allocative effect.

77. See Erik Rasmussen & Ian Ayres, Mutual Mistake, 22 J. LEGAL STUD. 309 (1993); Levmore, supra note 31, at 137-38.

78. At least until the research subjects learn that the law allows the researcher to lie, the researcher's false assurance that it has no reason to think the subject's cells are valuable should deter the subject from searching himself. And to the extent self-searching is wasteful, this effect strengthens the case for allowing the lie. Nevertheless, allowing lying should eventually inspire more self-searching, not less. Once the subject knows he can not rely on the researcher for an honest answer to his question, self-searching becomes his only way to obtain a reliable answer.

79. See Thomas P. Dillon, Note, Source Compensation for Tissues and Cells Used in Biomedical Research: Why a Source Shouldn't Share in the Profits, 64 NOTRE DAME L. REV. 628, 631 (1989).

80. See, e.g., Aaron D. Twerski & Neil B. Cohen, The Myth of Justiciable Causation, 1988 ILL. L. REV. 600, 620 (reviewing the public's tendency to overrate small chances of large payoffs).

81. The federal statute imposing criminal penalties for perjury requires that the lie be uttered in the course of a formal proceeding. See 18 U.S.C.A. 1621 (West Supp. 1996). Its purpose is to keep the process of justice free from the contamination of false testimony. See generally United States v. Manfredonia, 414 F.2d 760 (S.D.N.Y. 1969).

82. Except when the lie of the researcher's employee is uttered in such a formal setting that it constitutes a crime, the proposed right to lie would preclude criminal liability as well as civil. The reasons for guarding the researcher and its employees from civil liability argue as forcefully against criminal liability.

When the lie of the researcher's employee constitutes a crime, the offense lies in polluting society's fact-finding processes. As perjury by a defendant during a civil proceeding does not necessarily call for upholding the civil plaintiff's action, the lie of the researcher's employee, when criminal, need not automatically trigger civil liability to the subject.

83. See IMMANUEL KANT, GROUNDWORK OF THE METAPHYSICS OF MORALS 96 (1964).

84. The issue here-whether the researcher's lie is actionable-must be distinguished from the issue of whether the researcher's use of the subject's or patient's cells without their consent is actionable. For discussion of the latter issue, see infra part VIII B.

85. See RESTATEMENT (SECOND) OF TORTS 46 (1974).

86. "Outrageous" conduct has been defined as "conduct exceeding all bounds usually tolerated in a decent society of a nature which is especially calculated to cause ... mental distress of a very serious kind." WILLIAM PROSSER & W. PAGE KEETON, TORTS 12, at 60-64 (5th ed. 1984).

87. See Kelco Disposal v. Browning-Ferris Industries, 845 F.2d 404 (2d Cir. 1988).

88. See Thompson v. Williamson Co., 965 F. Supp. 1026 (M.D. Tenn. 1997) (ruling father can't recover for intentional infliction of emotional distress (IIED) where deputy sheriff shot and fatally wounded mentally disturbed son holding machetes); Coleman v. Special School Dist. No. 1, 959 F. Supp. 1112 (D. Minn. 1997) (school district's firing of principal and dissemination of written statements regarding prior, concealed felony convictions not grounds for IIED); Kraslavsky v. Upper Deck Co., 65 Cal. Rptr. 2d. 297 (Cal. Ct. App. 1997) (no grounds for IIED where employee terminated after refusing to take drug test, even when no individualized suspicion); Gosvener v. Coastal Corp., 59 Cal. Rptr. 2d 339 (Cal. Ct. App. 1996) (no grounds for IIED where supervisor who held safety sensitive position at a dangerous chemical refinery in a residential neighborhood was terminated for being an alcoholic).

89. See, e.g., Mink v. University of Chicago, 460 F. Supp. 713 (N.D. Ill. 1978).

90. The tort of battery requires only that the defendant acts with intent to cause a harmful or offensive contact, or apprehension thereof, and that such a contact results. See RESTATEMENT (SECOND) OF TORTS 13 (1974); see also WILLIAM PROSSER & W. PAGE KEETON, TORTS 9, at 39-42 (5th ed. 1984); see also Richard Epstein, Intentional Harms, 4 J. LEGAL STUD. 391, 421 (1975).

91. See, e.g., Linda Daniels, Commericalization of Human Tissues: Has Biotechnology Created the Need for an Expanded Scope of Informed Consent, 27 CAL. W. RES. L. REV. 209 (1990).

92. See, e.g., Canterbury v. Spence, 464 F.2d 772 (D.C. Cir. 1972).

93. See RESTATEMENT (SECOND) OF CONTRACTS 159 (1979); RESTATEMENT (SECOND) OF TORTS 46 (1974).

94. See W. Page Keeton, Fraud, Concealment and Nondisclosure, 15 TEX. L. REV. 1, 25-26, 31-40 (1936).

95. See Papazian v. American Steel & Wire Co., 115 F. Supp. 111, 116 (N.D. Ohio 1957).

96. See RESTATEMENT (SECOND) OF AGENCY 13 cmt. 9 (1958); RESTATEMENT (SECOND) OF TRUSTS 2 cmt. 3 (1958); RESTATEMENT (SECOND) OF TORTS 874 (1974); see also DEBORAH A. DEMOTT; FIDUCIARY OBLIGATION, AGENCY, AND PARTNERSHIP 4 (1st ed. 1991).

97. See National Research Service Award Act of 1974, Pub. L. No. 93-348, 88 Stat. 342 (1974).

98. Id. at 352-53.

99. Id. at 348.

100. Id. at 349.

101. Both the Food and Drug Administration and the Department of Health and Human Services have issued regulations that, where applicable, require researchers to disclose certain information to research subjects. 21 C.F.R. 50 (1989); 45 C.F.R. 46 (1998). If those regulations would condemn a researcher's failure to disclose that the subject's cells have been found valuable, they would seem to condemn, a fortiori, a deliberate lie about the cells' value.

The regulations focus entirely on assuring that the subject is alerted to risks, including risks of psychological distress, social stigmatization or financial indebtedness. Not surprisingly, a number of provisions suggest that a researcher need not disclose that a subject's cells have proven valuable. Reflecting the focus on alerting subjects to possible embarrassment, 46 C.F.R. 101(b)(4) exempts from any obligations "[r]esearch involving the ... study of ... pathological specimens or diagnostic specimens ... if the information is recorded by the investigator in such a manner that subjects cannot be identified, directly or through identifiers linked to the subjects." Id. Reflecting the focus on alerting subjects to possible physical injury, 46 C.F.R. 116 (1998) further allows an Institutional Review Board to waive the usual requirement of informed consent when the research involves no more than minimal risks to the subject. Moreover, in 1981, the Department clarified that this waiver may be obtained through an expedited procedure when the research involves the mere collection of blood samples.

On the other hand, some language in the regulations could be interpreted to require researchers who discover that a subject's cells are valuable to alert the subject to their discovery. 46 C.F.R. 116(b)(5) requires disclosure when "significant new findings [are] developed during the course of the research which may relate to the subject's willingness to continue participation." Similarly, 46 C.F.R. 116(a)(3) requires that subjects be informed of likely benefits from the research.

These guidelines apply to studies funded by any of the seventeen federal agencies, experiments to prove the efficacy of medicines or medical devices, and research by academics regardless of the source of funds. In addition, California, New York, and Virginia have legislated consent requirement for research not governed by the federal guidelines. None of these statutes expressly require that subjects be notified when their cells are found to be valuable. See CAL. HEALTH & SAFETY CODE 24170-24179.5 (West 1986); N.Y. PUB. HEALTH LAW 2440-2446 (McKinney Supp. 1986); VA. CODE ANN. 37.1 (1979).

102. See Moore v. Regents of the University of California, 793 P.2d 479, 482 (Cal. 1990), cert. denied, 499 U.S. 936 (1991); see also Anne T. Corrigan, Note, A Paper Tiger: Lawsuits against Doctors for Non-Disclosure of Economic Interests in Patients' Cells, Tissues and Organs, 42 CASE W. RES. L. REV. 565, 583 (1992).

103. U.C.C. 1-203 (1995); see also CHARLES FRIED, CONTRACT AS PROMISE (1981) (emphasizing the importance of good faith). The Greeks saw good faith as a universal social force that governed their social interrelationships. See FRITZ PRINGSHEIM, THE GREEK LAW OF SALES 87 (1950). Canon law posited good faith in a universal moral norm rather than a social norm. See Powel, Good Faith in Contracts, 9 CURRENT LEGAL PROBLEMS 21-22 (1956).

104. Laidlaw v. Organ, 15 U.S. 27 (2 Wheat) 178 (1810); Leitch Gold Mines, Ltd. v. Texas Gulf Sulfur, 1 O.R. 469 (1969).

105. See supra note 25 and accompanying text.

106. See Thomas Murray, Gifts of the Body and the Needs of Strangers, 17 HASTINGS CENTER REPORT 30 (1987); Thomas Murray, The Gift of Life Must Always Remain a Gift, 7 DISCOVER, Mar. 1986, at 90; Thomas Murray, On the Ethics of Commercializing the Human Body (1986), (unpublished paper prepared for U.S. Congress Office of Technology Assessment) (on file with author); Thomas Murray, Who Owns the Body? On the Ethics of Using Human Tissue for Commercial Purposes, 8 IRB: A REV. OF HUM. SUBJECTS RES. 1 (1986).

107. See Murray, Gifts of the Body and the Needs of Strangers, supra note 105, at 33.

108. See id. at 34.

109. See id. at 32-33.

110. See id. at 35.

111. See RICHARD M. TITMUSS, THE GIFT RELATIONSHIP (1971); see also MARCEL MAUS, THE GIFT (1967); Lori B. Andrews, My Body, My Property, 16 HASTINGS CENTER REPORT 28 (1986).

112. See, e.g., TITMUSS, supra note 110, at 197.

113. See Richard A. Posner, A Theory of Primitive Society, With Special Reference to Law, 23 J.L. & ECON. 1, 32 (1980).

114. Id. at 33.

115. Id. at 34.

116. See, e.g., David Friedman, What is Fair Compensation for Death or Injury?, 2 INT'L REV. L. & ECON. 81 (1982) (the diminishing marginal utility of wealth, which lies behind the demand for insurance, is not brought into play by small losses).

117. See Scott Cook, The Obsolete "Anti-market" Mentality: A Critique of the Substantive Approach to Economic Anthropology, 68 AMER. ANTHROPOLOGY 323 (1966) (responding to Karl Polyanyi, Our Obsolete Market Mentality, 3 COMMONWEALTH 109-17 (1947)).

118. The assumption here is that the collector had a therapeutic purpose for recommending that the samples be collected, and that the patient consented to the collection for that purpose. The patient was not asked about, and was presumably unaware of, the subsequent research and commercial use of those samples.

The facts in Moore differed significantly. There, apparently, defendants collected some samples with no therapeutic purpose whatsoever. Although allowing those collections subjected the patient to some inconvenience, his physician, one of the defendants, led him to believe the collections were necessary for therapeutic purposes. Moore v. Regents of the University of California, 793 P.2d 479, 481 (1990), cert. denied, 499 U.S. 936 (1991).

119. The patient is "non-consenting," despite having consented to the collection for therapeutic purposes, only in the sense that he never consented to any research or commercial use of his samples and never assigned the right to revenues derived from the samples to the researcher. The subject is "non-consenting" because he never assigned the right to revenues derived from the samples to the researcher. The assumption here is that the patient and subject are silent on these matters. Of course, if the patient or subject expressly refuses consent, his wishes should be respected.

Because of the continuing ban on exculpatory provisions in any consent agreement governed by the Department of Health and Human Services guidelines, many research subjects will be non-consenting as the term is used here. See 45 C.F.R. 46.116 (1998). Yet the purpose of the rule banning exculpatory provisions had nothing to do with the subject's commercial rights in the extractions. Its purpose was to preserve a subject's right to sue should he be injured during the course of the research. See Hearings: The Use of Human Biological Materials in the Development of Biomedical Products 233 (October 29, 1985) (statement of Dr. Charles R. McCarthy, Director, Office for Protection From Research Risks, National Institute of Health).

120. Of the many commentators discussing the patient's claim, most support the patient's right to share. See, e.g., Mary Taylor Danforth, Cells, Sales and Royalties: The Patient's Right to a Portion of the Profits, 6 YALE L. & POL'Y REV. 179 (1988); William Bowlier, Note, Sperm, Spleens, and Other Valuables: The Need to Recognize Property Rights in Human Body Parts, 23 HOFSTRA L. REV. 693 (1995); Laura M. Ivey, Comment, Moore v. Regents of the University of California: Insufficient Protection of Patient Rights in the Biotechnological Market, 25 GA. L. REV. 489 (1991).

121. Although Moore provides one precedent for denying the patient's claim to the revenues, there is no discrete statutory or common law that deals specifically with this issue. Nor is it clear whether the issue should be treated as one of property, tort, contract, patent, or trade secret law. Certainly a patient seeking a share of the profits could advance his claim under a wide variety of legal theories.

122. One might think granting subjects a right to share would encourage persons not only to participate in the researcher's project, but also to self-search, in other words, to undertake the initiative and risks of testing themselves. If searching is better conducted by persons self-searching, this would provide a further reason for giving subjects a right to share. One must distinguish, however, between participating with the researcher's project and taking the initiative and bearing the risk of self-searching. Recognizing the right to share encourages the first but not the second. Instead, denying the right to share better encourages the second. Self-searching with a view toward allowing collection by the highest bidding researcher then becomes the only way a person can realize for himself the value of his cells. In general, the more the law favors researchers over subjects, the more the law encourages persons to self-search and keep all researchers out of the search as much as possible.

We see the same principle at work in the oilman/farmer case where rules favoring oilmen drive the suspicious farmer to take the initiative and the risks of hiring a geologist to ascertain the value of his mineral rights. If such self-searching is socially desirable, that is an argument for the law favoring the oilman. If such self-searching is not socially desirable, say because it duplicates previous testing or is otherwise wasteful, that is an argument for the law favoring the farmer. Assuming that the costs of self-searching exceed the benefits, the case for a right to share is marginally strengthened by that rule's tendency to reduce self-searching.

123. See id.; see also supra notes 76-78 and accompanying text.

124. For discussion of why the researcher can search at lower cost than the subject, see supra notes 73-74 and accompanying text.

125. See OTA REPORT, supra note 1, at 54.

126. See id.

127. See id.

128. Id. at 41. The costs of identifying the patient's contribution resemble the prohibitive identification cost of patenting the ideas generated by basic research. With the passage of time it becomes increasingly difficult to identify the products in which the basic ideas are embodied. Here identifying the contribution of the patient's cells to various end products becomes increasingly difficult. See RICHARD A. POSNER, ECONOMIC ANALYSIS OF LAW 67 (4th ed. 1993).

129. The property rights issue arises, for example, when a landowner sues for trespass an airline that has flown at a high elevation over his property. One reason for ruling for the airline, and thus refusing to recognize the landowner's property right to the airspace above his land, is to avoid the cost of negotiating the many agreements that would be needed for the airline to obtain the consent of all landowners over whose land its route would pass. See Thomas W. Merrill, Trespass, Nuisance and the Costs of Determining Property Rights, 14 J. LEGAL STUD. 13 (1985).

130. See infra notes 143-152 and accompanying text.

131. The Office of Technology Assessment found that "transaction costs are likely to dwarf the cost of payment to ... individuals [whose cells contribute to commercial gain.]" OTA REPORT, supra note 1, at 31.

132. WILLIAM SHAKESPEARE, HAMLET, act III, sc.1, lines 86-88.

133. For a summary of the inefficiencies of divided ownership, see RICHARD POSNER, ECONOMIC ANALYSIS OF LAW 120 (5th ed. 1995).

134. See Alan J. Lemin, supra note 16, at 197.

135. See OTA REPORT, supra note 1, at 43-44. John Rawls is one philosopher who would oppose allowing the subject a share of the revenues. Rawls justifies rewarding the born lucky only when society has reason to expect that the reward will motivate the born lucky to significant added efforts that benefit the community as a whole. JOHN RAWLS, A THEORY OF JUSTICE, 102-104 (2d ed. 1971).

136. See OTA REPORT, supra note 1, at 43-44.

137. Again, the situation in Moore differs from that discussed here in several respects. In Moore, some collections were undertaken with no therapeutic purpose in mind at all, yet the patient was allowed to believe the collections were solely for therapeutic purposes. Moore v. Regents of the University of California, 793 P.2d 479, 492 (1990), cert. denied, 499 U.S. 936 (1991). Moore was treated purely as a research subject, yet he was led to believe he was purely a patient.

One rule Moore establishes is that when the doctor's only purpose of a collection is to aid research, the doctor should inform the patient of that fact. Federal regulations, where they govern, also support this rule for they require that consent to research use be obtained where samples are taken from patients primarily for research purposes. See 46 C.F.R. 110(b) (1998). But this rule leaves open the issue here where researchers merely use material collected for therapeutic purposes.

Moore also clarifies the information a doctor must provide in order for a patient to give informed consent to the doctor's recommended treatment. Under Moore, doctors who have research interests in the treatment they recommend must alert the patient to those research interests, at least when those interests might have influenced their decision about what treatment to recommend. Moore, 793 P.2d at 479. The knowledge of the doctor's research interests bears on the patient's decision about whether to seek a further opinion regarding the recommended treatment and also on his decision about which doctor should administer the treatment. Without knowledge of the doctor's other interests, Moore holds, the patient's decision to consent to the doctor's recommended treatment cannot be an informed one. Id. at 508.

So understood, the ruling in Moore only affects those involved in the patient's treatment. The ruling puts no obligations on researchers or pathologists not involved in the treatment who merely gain access to the samples afterwards.

138. For instance, the researcher's negligent or deliberate failure to obtain the patient's consent might be held to afford the patient an action for the modest damages stemming from the indignity he suffers because his samples are used in ways he would not have approved. See, e.g., Alan Meisel, A "Dignitary Tort" as a Bridge between the Idea of Informed Consent and the Law of Informed Consent, 16 LAW MED. & HEALTH CARE 210, 211-14 (1988); Anne T. Corrigan, Note, A Paper Tiger: Lawsuits Against Doctors for Non-Disclosure of Economic Interests in Patients' Cells, Tissues and Organs, 42 CASE W. RES. L. REV. 565 (1992). The court in Moore recognized a similar dignitary action against an uninformed patient's doctor. Moore, 793 P.2d at 508. To be sure, the doctor not only failed to inform his patient that his samples might be used for research and commercial purposes, he also misled his patient into believing that certain collections were for therapeutic purposes when in fact they were solely for research purposes. The court further limited the action by basing it on the fiduciary duty doctors owe to all their patients. Id. at 511. Thus researchers who have no contact with the patient would have no duty to warn of the possible research and commercial use.

Despite these distinctions, Moore gives some support to the notions that patients should be informed when research or commercial use of their samples is contemplated and that courts should recognize some action for the modest indignity when the samples of uninformed patients are so used.

139. A devout Catholic woman with ovarian cancer might object to the use of her removed ovary for the development of oral contraceptives. Similarly, an Orthodox Jew who believes that it is good to bury the parts of the body in the same area where the body itself will rest after death might not want her organs to be sent to a research facility. A person morally opposed to war might not want her cells to be used in experiments regarding the effects of chemical warfare, while an animal rights activist would object to the use of her tissue in the development of painful skin tests to be used on live animals.

Sharon N. Perley, Note, From Control Over One's Body to Control Over One's Body Parts: Extending the Doctrine of Informed Consent, 67 N.Y.U. L. REV. 335, 346 (1992).

140. Research hospitals usually provide notice on admission and do not seek informed consent until treatment. See ROBERT LEVINE, ETHICS AND REGULATION OF CLINICAL RESEARCH 111-113 (1986).

141. See Moore, 793 P.2d at 485.

142. See id. at 511.

143. See Eleanor S. Glass, Note, Restructureing Informed Consent: Legal Theory for the Doctor-Patient Relationship, 79 YALE L.J. 1537 (1970); Henry K. Beecher, Ethics and Clinical Research, 274 NEW ENG. J. MED. 1354 (1966).

144. See supra note 100.

145. For the argument that patients should have the right to control the course of research by putting restrictions on the use of their samples, see Perley, supra note 138.

146. The possibility that therapeutic goals will suffer from informing patients about research use contradicts the holding of Moore, for the court there held that alerting patients to their doctor's research interests furthered therapeutic goals by giving the patient a sounder basis for picking a doctor, requesting a second opinion and allowing treatment. Moore, 793 P.2d at 496.

147. See Canterbury v. Spence, 464 F.2d 772, 786 (D.C. Cir. 1972).

148. The Department of Health administrators responsible for the federal regulations protecting human subjects cite the remote chance of commercial gain as the primary reason for not requiring researchers to alert subjects to the chance of such gain. See Hearings: The Use of Human Biological Materials in the Development of Biomedical Products 233, 263 (October 29, 1985) (statement of Dr. Charles R. McCarthy, Director, Office for Protection From Research Risks, National Institute of Health). Those regulations, in particular the ban on exculpatory provisions, may discourage researchers from mentioning that research or commercial use is possible. For those regulations do not allow patients to give up any rights they may have to the cell lines or end product derived from their samples. This effect of the regulations was surely unintended. See supra note 121.

149. For the current U.S. law on whether patients who have consented to samples on therapeutic grounds need to be informed of possible research and commercial use, and their consent for such use obtained, see Catherine A. Tallerico, Note, From Control Over One's Body to Control Over One's Body Parts: Extending the Doctrine of Informed Consent, 67 N.Y.U. L. REV. 335 (1992); Catherine A. Tallerico, The Autonomy of the Human Body in the Age of Biotechnology, 61 U. COLO. L. REV. 659, 673-74 (1990).

In Canada, cells from placentas are routinely used for commercial purposes without the patient's knowledge or consent. Cells collected during amniocenteses, circumcision and psychosurgery are routinely used for research without patient knowledge or consent. Bernard M. Dickens, The Control of Living Body Materials, 27 U. TORONTO L.J. 142, 155 (1977).

150. See generally RUSSELL SCOTT, THE BODY AS PROPERTY (1981); Richard Gold, Owning Our Bodies: An Examination of Property Law and Biotechnology, 32 SAN DIEGO L. REV. 1167 (1995); Lori B. Andrews, My Body, My Property, 16 HASTINGS CENTER REPORT 28 (1986); Paul Matthews, Whose Body? People as Property, 36 CURRENT LEGAL PROBLEMS 193 (1983); Bernard M. Dickens, Living Tissue, Organ Donors, and Property Law: More on Moore, 8 J. CONTEMP. HEALTH L. & POL'Y 73 (1992); Phillippe Ducor, The Legal Status of Human Materials, 44 DRAKE L. REV. 195 (1996); Michelle B. Bray, Note, Personalizing Personalty: Toward a Property Right in Human Bodies, 69 TEX. L. REV. 209 (1990); Daniel M. Wagner, Comment, Property Rights in the Human Body: The Commercialization of Organ Transplantation and Biotechnology, 33 DUQ. L. REV. 931 (1995); see also Margaret Radin, Property and Personhood, 34 STAN. L. REV. 957 (1982) (Radin is perhaps the most well known proponent of the essentialist approach to concepts like property).

151. See Moore, 793 P.2d at 479.

152. See Allen B. Wagner, The Legal Impact of Patient Materials Used for Product Development in the Biomedical Industry, 33 CLINICAL RESEARCH 444, 445 (1985).

153. See Thomas Murray, Gifts of the Body and the Needs of Strangers, 17 HASTINGS CENTER REPORT 30 (1987).

154. See Roy Hardiman, Toward the Right of Commerciality: Recognizing Property Rights in the Commercial Value of Human Tissue, 34 UCLA L. REV. 67 (1986).

155. See Mary T. Danforth, Cells, Sales, and Royalties: The Patient's Right to a Portion of the Profits, 6 YALE L. & POL'Y REV. 179 (1988).

156. See Perley, supra note 138; Richard Delgado & Helen Leskovac, Informed Consent in Human Experimentation: Bridging the Gap Between Ethical Thought and Current Practice, 34 UCLA L. REV. 67 (1986).

157. In support of this focus, see RICHARD POSNER, OVERCOMING LAW 387-405 (1995).