Chapter 3 covers theoretical issues surrounding the nature of a “license” of IP and how it compares to similar rights of usage in the context of real and personal property. It considers whether, as some courts have held, a license is a covenant not to sue, or a property right with more substantial ties to the underlying IP rights. It next addresses the law governing IP transactions, including state contract law, property law, the Uniform Commercial Code and federal common law. It concludes with a discussion of the effects of transfers of IP on underlying license rights.

While Erie limited federal judicial power along one dimenions, it left many questions unresolved: How far did its rule extend? Were there still some special subjects about which the federal courts could develop a federal common law? What procedural rules governed the federal courts? Should the federal courts follow the choice-of-law rules in their states or develop an independent body of federal choice-of-law rules?The Court dealt with several of these questions in the years immediately after Erie. And it had to begin to interpret the reach of the Federal Rules of Civil Procedure, a code aimed at simplifying the rules regulating how litigation in the federal courts should proceed, adopted in 1937. In Sibbach v. Wilson the Court relied on a distinction between rules regulting procedure and those dealing with substance, and controversially held that an order directing that a litigant undergo a physical examination dealt with procedure rather than substance. It generally rejected constitutional challenges to state choice-of-law rules, and then held that Erie required the federal courts to follow the choice-of-law rules of the states in which they sat.