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Abstract: At the time patent applications are reviewed, the Patent and Trademark Office has no way of identifying the small number of applications that are likely to end up having real economic significance. Thus patent applications are for the most part treated alike, with every application getting the same - and by necessity sparse - review. In this short magazine piece, we urge in response three basic reforms. First, we would weaken the presumption of validity that today attaches to all issued patents. The modern strong presumption simply does not reflect the reality of patent review; presumptions, in short, should be earned. Second, because legitimate inventors need as much certainty as the law can provide, we would give applicants the option of earning a presumption of validity by paying for a thorough examination of their inventions. Put differently, applicants should be allowed to "gold-plate" their patents by paying for the kind of searching review that would merit a strong presumption of validity. Third and finally, because competitors also have useful information about which patents worry them and which do not, we support instituting a post-grant opposition system, a process by which parties other than the applicant would have the opportunity to request and fund a thorough examination of a recently issued patent. As we explain in the piece, these reforms would together allow the Patent Office to focus its resources on patents that might actually matter, and it would also both reduce the incentive to file patents of questionable validity and reduce the harm caused by such patents in any event.
patent law, patent reform, patent, post-grant, gold-plate
Abstract: When individuals infringe copyright, they often use tools, services, and venues provided by other parties. An enduring legal question asks to what extent those other parties should be held liable for the resulting infringement. For example, should a firm that produces photocopiers be required to compensate authors for any unauthorized copies made on that firm's machines? What about firms that manufacture personal computers or offer Internet access; should they be liable, at least in part, for online music piracy? Modern copyright law addresses these issues through a variety of common law doctrines and statutory provisions. In this essay, we introduce those rules and evaluate them from an economic perspective. In the process, we emphasize that every mechanism for rewarding authors inevitably introduces some form of inefficiency, and thus the only way to determine the proper scope for indirect liability is to weigh its costs and benefits against those associated with other plausible mechanisms for rewarding authors.
copyright, indirect liability, third-party liability, Grokster, Napster, vicarious, contributory
Abstract: Once purchased, information goods are often shared among groups of consumers. Computer software, for example, can be duplicated and passed from one user to the next. Journal articles can be copied. Music can be dubbed. In this paper, we ask whether these various forms of sharing undermine seller profit. We compare profitability under the assumption that information goods are used only by their direct purchasers, with profitability under the more realistic assumption that information goods are sometimes shared within small social communities. We reach several surprising conclusions. We find, for example, that under certain circumstances sharing will markedly increase profit even if sharing is inefficient in the sense that it is more expensive for consumers to distribute the good via sharing than it would be for the producer to simply produce additional units. Conversely, we find that sharing can markedly decrease profit even where sharing reduces net distribution costs. These results contrast with much of the prior literature on small-scale sharing, but are consistent with results obtained in related work on the topic of commodity bundling.
Abstract: A patent holder whose patent is made public only after the relevant technology has been widely adopted can demand not only a royalty that reflects the intrinsic value of that technology but also a royalty that reflects the value of each infringing firm's technology-specific investments. This is the familiar patent holdout problem, and it particularly plagues the standard-setting process. Importantly, and the insight missed both in practice and in the literature today, the greater the number of patent holders in this holdout position, the less each can expect to earn from this tactic. That is, if fifteen patent holders can credibly threaten to shut an infringer for six months while that firm redesigns its products and services, the value associated with avoiding six months of disruption must be split fifteen ways. If three hundred patent holders can credibly make that threat, the pro rata share drops by a factor of twenty. More patents means less money per patent holder. Less money, in turn, means less of an incentive for a firm to strategically delay in the hopes of being a patent holdout, and less of an incentive for an accidental patent holdout to actually bring suit. In this eight-page magazine-style piece, I examine this dynamic and argue that firms can harness it as a way of protecting themselves from patent holdouts. If I am right here, my analysis has not only a practical payoff for firms hoping to implement patented technologies, but also some theoretical punch. After all, the conventional literature on the tragedy of the anti-commons asserts that resources will be inefficiently under-used in the face of too many overlapping patent rights. My point here is that some resources actually come into efficient use precisely because there are so many patent holders who each can plausibly veto a particular party's use.
anti-commons, tragedy of the anti-commons, patent holdout, patent, standards, SSO, standard-setting organization, protocol
Abstract: Internet service providers are today largely immune from liability for their role in the creation and propagation of worms, viruses, and other forms of malicious computer code. In this Essay, we question that state of affairs. Our purpose is not to weigh in on the details - for example, whether liability should sound in negligence or strict liability, or whether liability is in this instance best implemented by statute or via gradual common law development. Rather, our aim is to challenge the recent trend in the courts and Congress away from liability and toward complete immunity for Internet service providers. In our view, such immunity is difficult to defend on policy grounds, and sharply inconsistent with conventional tort law principles. Internet service providers control the gateway through which Internet pests enter and reenter the public computer system. They should therefore bear some responsibility for stopping these pests before they spread and for helping to identify individuals who originate malicious code in the first place.
Tort law, virus, worm, Internet, strict liability, negligence, cyberspace
Abstract: This article considers an externality that affects a broad range of markets, specifically markets where one set of firms sells some platform technology like a computer, video game console, or operating system, while another possibly overlapping set of firms sells peripherals compatible with that platform, for example computer software or video game cartridges. The externality causes certain peripheral sellers to charge prices that are unprofitably high. That is, these firms could earn greater profits if only they could coordinate to charge lower prices. In many markets, such coordination is possible; firms can contract, for example, or integrate. In markets based on relatively new platform technologies, however, coordination will typically be difficult. The article explains why, and argues that intellectual property law can and should facilitate price coordination in these "emerging technology" settings.
Abstract: Patent applications are evaluated in light of the prior art. What this means is that patent examiners evaluate a claimed invention by comparing it with what in a rough sense corresponds to the set of ideas and inventions already known to the public. This is done for three reasons. First, the comparison helps to ensure that patents issue only in cases where an inventor has made a non-trivial contribution to the public's store of knowledge. Second, it protects a possible reliance interest on the part of the public since, once an invention is widely known, members of the public might reasonably assume that the invention is free for all to use. And third, it pressures inventors to file their patent applications promptly lest some other inventor disclose a related invention or the applicant himself inadvertently let slip some fraction of his own research result. The prior art inquiry has a fourth policy implication, however, and while this one might not have been one of the motivating factors for establishing the inquiry in the first place, it is just as important when it comes to designing and interpreting sensible prior art rules. That additional wrinkle is simply this: the fact that patent applications are evaluated in light of the prior art gives firms a strategic incentive to create prior art. A firm can publish a journal article or engage in a public demonstration and in that way affect both a rival's ability to patent a related invention and the rival's incentive to do so. Perhaps surprisingly, this can make the disclosing firm better off even though, by revealing information, the firm is likely helping its rival and, worse, narrowing or even fully preempting the very patent it seeks. In this Article, then, we explain the incentive for strategic disclosure. We show that a firm trailing in a given patent race has an incentive to disclose information in the hopes of preempting a rival's patent, but only if the laggard itself has little chance of leapfrogging the leader and winning the race. We show that a firm leading a patent race similarly has an incentive to disclose, this time in an effort to reduce its rival's expected payoff and in that way encourage the rival to quit the race. We consider the possibility that private negotiations will displace public disclosures, for example with the laggard agreeing not to disclose and in exchange receiving from the ultimate patentee some form of favorable licensing agreement. Lastly, we consider the implications all this might have for the patent system overall.
patent law, disclosure, prior art, information economics
Abstract: Copyright holders today increasingly find their rights and responsibilities dictated not by the explicit words of the copyright statute, but instead by the powers and limitations of what has come to be known as "digital rights management" technology. In this ten-page magazine-style piece, I consider how copyright law should respond. My argument proceeds in two basic steps. First, I argue that, while DRM might represent a powerful restriction, the constraint will never be Orwellian. Consumers, after all, will use their dollars to vote against encryption techniques that are too limiting; and, besides, DRM suffers an Achilles heel: in every system designed to control content, at some point consumers must be able to read, hear, or otherwise experience the purchased information. Whenever that happens, the information is necessarily exposed. Second, if all this is true, then DRM simply makes copyright law look a lot like every other area of legal endeavor. There is a formal set of rules enforced by judges, administrative officials, and the like, and there is in addition a weak but effective overlapping capacity through which private actors can take matters into their own hands. Put differently: as I show in the piece, criminal law, trade secret protection, First Amendment jurisprudence, and indeed every other legal regime is today implemented through a combination of powerful public mechanisms and less costly but weaker private ones. DRM, I argue, simply brings copyright law into the fold.
DRM, digital rights management, copyright, copyright law, trade secret, privacy, First Amendment, self-help
Abstract: The United States Patent and Trademark Office is tasked with the job of reading patent applications and determining which ones qualify for patent protection. It is a Herculean task, and the Patent Office pursues it subject to enormous informational and budgetary constraints. Nonetheless, under current law, courts are bound to defer to the Patent Office's decisions regarding patent validity. In this Article, we argue for reform. Deference to previous decision-makers is appropriate in instances where those previous decisions have a high likelihood of accuracy, and the patent system should endeavor to create processes that fit this mold. But granting significant deference to the initial process of patent review is indefensible and counter-productive. Patents should be vulnerable to challenge until and unless they are significantly evaluated in an information-rich environment. At that point, they will have earned and therefore should be accorded a presumption of validity. Such an approach would better serve the patent's systems long-run incentive goals, and it would give patent applicants better incentives to file for genuine inventions but leave their more obvious and incremental accomplishments outside the patent system's purview. Here, we therefore suggest the creation of a two-tier system of patent validity, with patents that are subject to intensive scrutiny accorded a strong presumption of validity, while untested patents are left to be evaluated more fully in court.
patent law, patents, patent review, presumption, presumption of validity
Abstract: Under the rule of prosecution history estoppel, patent applicants who amend their claims during the course of patent prosecution assume a significant risk: namely, the risk that a court will later construe the changes as concessions that should be read to limit patent scope. This risk is exacerbated by strong evidentiary presumptions under which courts are to assume, unless the patentee presents sufficient evidence otherwise, that every change triggers estoppel, and that the resulting estoppel forfeits everything except that which the revised language literally describes. The justification for these presumptions is that, implemented in this fashion, prosecution history estoppel makes patent scope more predictable. In this Article, I argue that the benefit comes at too high a price. Drawing on a large empirical study of patent prosecution, I show that, because of these evidentiary presumptions, estoppel is dangerously sensitive to differences between patent examiners and differences across technology categories. That is, estoppel treats similar applications in dissimilar ways, not because of differences on the merits, but instead because of the personal characteristics of the examiners involved and because of differences inherent to the types of technology at issue. A better rule, I argue, would minimize the significance of examiner and technology disparities by reversing the current evidentiary presumptions and thus recognizing estoppel only where there is clear evidence that the applicant and the examiner intended to forfeit a given scope of coverage.
patent, patent prosecution, patent office, estoppel, prosecution history estoppel, equivalents, doctrine of equivalents, patent examiner, consistency, examiner consistency
Abstract: Fifteen scholars on auctions and telecommunications regulation urge the FCC to cancel bids made in, or permit winning bidders to opt out of, the reauction of the NextWave licenses in Auction 35. For auctions to function efficiently, buyers and sellers must follow basic rules, including the rule that a seller deliver in a timely manner what the winning bidder has purchased. This rule has not been applied in Auction 35. The FCC auctioned something that it did not have - immediate access to the spectrum for the winning bidders. Thus, if the FCC forces the winning bidders to pay, they will sue the agency for forcing them to pay for something that they did not receive. Alternatively, their shareholders will sue the companies. Meanwhile, wireless carriers have invested in less efficient technologies to meet capacity needs. The FCC has said that its current policy toward Auction 35 seeks to "protect the integrity" of the spectrum auction process. The opposite is already occurring. The FCC increases uncertainty in the wireless market if it holds carriers accountable for winning bids for licenses that the agency cannot deliver. Bidders will discount their future bids accordingly, and auction revenues will fall. That outcome does not benefit consumers, taxpayers, workers, or shareholders.
Abstract: Legal rules are typically implemented through a combination of public and private mechanisms. Burglars, for example, are deterred from unauthorized entry in part by the threat of jail time and police intervention, and in part by the knowledge that homeowners have guns, security systems, and other private measures by which to defend their property. Similarly, while entrepreneurs obviously use patent, copyright, and trade secret law to protect proprietary information, they also routinely take matters into their own hands by, for example, dividing sensitive information across employees such that no single employee ever knows enough to betray the firm completely. Every area of law can to some degree be characterized in this manner, framed in a way that emphasizes substitutability between public responses and their private alternatives. In this Essay, I examine several specific areas of law (free speech jurisprudence, trade secret law, copyright law, and patent law) from this perspective, using each as a case study from which to cull broader lessons about the proper structure for these public/private partnerships.
free speech jurisprudence, trade secret, copyright, patent
Abstract: This paper offers legal and economic analysis of two recent Supreme Court decisions, AT&T Corporation v. Iowa Utilities Board and Verizon Communications v. FCC. The paper is written with two audiences in mind. For those unfamiliar with the cases, we offer what we hope is an accessible yet detailed account of the underlying policy issues raised by a legal regime that requires incumbent local telephone carriers to lease parts of their telephone networks to would-be rivals. To that end, we discuss the main reasons why sharing rules are sometimes imposed in markets like the market for local telephone service, and we then link those issues to the specific legal questions at issue in these cases. For those already well versed in those issues, by contrast, we have woven into our account a variety of new ideas about both the relevant legal analysis and the underlying economics. We explain, for example, how low access prices might encourage incumbents to invest in new infrastructure despite the intuitive argument to the contrary, and how the Commission's seemingly nonsensical pick-and-choose rule can actually accomplish important policy goals, working in essence as a statutory most-favored-nation clause. In the end, then, we hope this paper will have value both for those relatively well steeped in telecommunications policy and for those just beginning to learn these issues.
telecommunications, Verizon, Iowa Utilities, natural monopoly
Abstract: The doctrine of equivalents is under attack - by the Federal Circuit, which has in recent years significantly constrained its application through the introduction of more aggressive estoppel and public disclosure rules; and by patent law scholars, who with increasing regularity urge that the doctrine be pared down or even fully repealed. This short Essay is framed as a response to one particular scholarly commentary, but it is in fact an attempt to state more broadly the case in favor of the doctrine of equivalents. My argument is that the doctrine serves three significant goals: it ensures that patent protection remains viable despite the limitations of language and foresight; it discourages wasteful efforts to perfect claim language; and, most importantly, it empowers the patent system to make better decisions by bringing into the process information that is systematically unavailable at the time when literal patent claims are written. No other patent system mechanism accomplishes these three objectives as completely. Thus, while I survey alternative approaches to claim articulation (what I describe in the title as substitutes for the doctrine of equivalents), my argument at its core is that the doctrine of equivalents has no substitutes. Not the reissue proceeding. Not the use of continuation applications. And certainly not more aggressive attempts at literal claim drafting.
patent law, doctrine of equivalents, equivalents analysis, prosecuiton history estoppel, reissue, patent claim, drafting, continuations, Festo
Abstract: This Article endeavors to offer a unified explanation for a wide variety of copyright doctrines, including the fixation requirement, the merger doctrine and the requirement that eligible works demonstrate at least a modicum of creativity. That explanation: these doctrines mitigate what would otherwise be difficult problems of proof. More specifically, each of these doctrines serves to deny protection in cases particularly prone to evidentiary complexity. The implicit logic is that, in these cases, the social cost of further litigation would likely outweigh the social benefit derived from offering copyright protection in the first place. Understanding these doctrines in this light offers a number of insights into their appropriate scope and application. For instance, the evidentiary theory resolves a long-standing debate over whether factual databases should be eligible for copyright protection (they should), and it also makes clear significant weaknesses in the current legal treatment of both derivative and jointly authored works.
Copyright, Merger Doctrine, Orginality, Scenes a Faire, Fixation, Evidence
Abstract: In deciding whether to issue a preliminary injunction, courts today focus on three factors: the likelihood that plaintiff will ultimately prevail on the merits; the harm defendant will suffer if the injunction is wrongly issued; and the harm plaintiff will suffer if the injunction is wrongly denied. The idea is to account for the possibility that the court might err in its prediction on the merits. If wrongful denial would be particularly harmful and there is a real chance of wrongful denial, the court is more reluctant to deny. By contrast, if wrongful issuance poses the greater threat, the court is more reluctant to issue. This decision rule has intuitive appeal but overlooks a key point: In most cases, the court will be just as uncertain about its estimates of the harms as it is about its prediction as to the outcome of the case. Thus, the conventional approach begins to unravel. A court cannot minimize the implications of its possibly errant prediction on the merits by blindly relying on its possibly errant estimates of relative harm. The optimal decision rule must account for both types of uncertainty.
uncertainty, preliminary relief, preliminary injunction, error, unbiased error, Learned Hand, cost/benefit analysis
Abstract: The conventional approach to preliminary relief focuses on irreparable harm but neglects entirely irreparable benefits. That is hard to understand. Errant irreversible harms are important because they distort incentives and have lasting distributional consequences. But the same is true of errant irreversible gains. When a preliminary injunction wrongly issues, then, there are actually two distinct errors to count: the irreparable harm wrongly imposed on the nonmoving party, and the irreparable benefit wrongly enjoyed by the moving party. Similarly, when a preliminary injunction is wrongly denied, there are again two errors, not one: the irreparable harm wrongly imposed on the moving party, and the irreparable benefit errantly accorded the nonmoving party. The conventional approach to preliminary relief mistakenly accounts for only half the problem.
Abstract: The copyright system has long been understood to play a critical role when it comes to the development and distribution of creative work. Copyright serves a second fundamental purpose, however: it encourages the development and distribution of related technologies like hardware that might be used to duplicate creative work and software that can manipulate it. When it comes to issues of online infringement, then, copyright policy serves two goals, not one: protect the incentives copyright has long served to provide authors, and at the same time facilitate the continued emergence of innovative Internet services and equipment. In this Chapter, I use the Google Book Search litigation as a lens through which to study copyright law’s efforts to serve these two sometimes-competing masters. The Google case is an ideal lens for this purpose because both the technology implications and the authorship implications are apparent. With respect to the technology, Google tells us that the only way for it to build its Book Search engine is to have copyright law excuse the infringement that is today by design part of the project. With respect to authorship, copyright owners are resisting that result for fear that the infringement here could significantly erode both author control and author profitability over the long run. I myself am optimistic that copyright law can and will balance these valid concerns. The Chapter explains how, discussing not only the formal legal rules but also the economic intuitions behind them.
copyright, law and economics, Google, Google Book Search, fair use
Abstract: In this six-page magazine piece, I consider how First Amendment jurisprudence accounts for the possibility of listener self-help. My starting point is the observation that, in this context, the existence of a cost-effective self-help remedy has long been taken to be a good reason to disallow government regulation meant to accomplish similar ends. Why, the courts implicitly ask, should the government be allowed to regulate speech when an offended party can just as effectively turn a blind eye? From there, I note that the opposite argument has also had purchase in court decisions: where a "captive audience" has no effective self-help mechanism by which to avoid exposure to a given communication, that absence of a plausible self-help mechanism has been accepted as an argument in favor of direct government intervention. My main contribution is to then challenge this latter notion. As I argue in the piece, the absence of plausible self-help remedies is not merely a deficiency that the government ought to be allowed to address, but also an opportunity that the government ought not be allowed to squander without justification. After all, society has a strong interest in finding ways to ensure that each of us is exposed to a wide variety of conflicting perspectives. Captive audiences often represent a relatively low-cost means by which to achieve that goal.
First Amendment, captive audience, free speech, self-help
Abstract: In 2006, Paramount Pictures partnered with other Viacom subsidiaries to sue YouTube (the online video-sharing site) for copyright infringement. Ever since, the nation’s newspapers, blogs and airwaves have been abuzz with commentary. Many commentators have taken the position that Paramount and Viacom are wrong on the law. YouTube, we are told, has no responsibility for the harm it causes; it is immune under the Digital Millennium Copyright Act. Other commentators, by contrast, have conceded that Paramount is right on the law, only to complain that a valuable and exciting distribution technology is about to be lost. In this short Essay, I argue that neither of these views could be farther from the truth. The DMCA does not protect YouTube because YouTube is not a “storage” provider. Yet YouTube will survive even without DMCA protection, because conventional copyright doctrines - including the rules of contributory and vicarious infringement and the defense of fair use - already create a balanced legal regime that will give YouTube the space it needs to develop while at the same time forcing it to do what it should have been doing all along: take steps that would, at a reasonable cost, reduce infringement without substantially interfering with legitimate use.
DMCA, Digital Millennium Copyright, safe harbor, copyright, fair use, YouTube, Google, storage, contributory, vicarious, fair use
Abstract: This editorial was published in the Los Angeles Times on March 20, 2007. In it, I explain the reasons why I joined Viacom to that week file suit against YouTube.
Viacom, YouTube, copyright, DMCA
Abstract: This newspaper editorial ran in the Wall Street Journal the day after the music industry filed the first wave of lawsuits against individuals who engaged in illegal file-sharing online. In it, I argue that individual lawsuits are a bad idea on public policy grounds, but are also the natural ramification of court decisions that make it unnecessarily difficult to hold intermediaries like Grokster, Napster, and KaZaA appropriately liable.
RIAA, peer-to-peer, Napster, Grokster, vicarious, contributory
Abstract: This amicus brief was filed at the Supreme Court prior to the oral argument in MGM v. Grokster. It argues that contributory infringement, vicarious liability, and other forms of indirect liability are entirely proper theories of liability for copyright enforcement, much as similar theories have long been viewed as proper elsewhere in the law. We further argue that copyright law ought not be read to waive off these theories of indirect liability merely because the product at issue is capable of some substantial non-infringing use. Such a rule would give manufacturers no incentive to deter infringement even when deterrence could be accomplished at low cost and without any significant interference with non-infringing uses. That is a needlessly inefficient interpretation of the law and hence should be rejected.
Grokster, Napster, vicarious liability, contributory infringement, indirect liability, third-party liability, copyright, peer-to-peer, Sony, Universal, substantial non-infringing use
Abstract: This new casebook in telecommunications law grew out of Thomas Krattenmaker's earlier casebook of the same title. Like Krattenmaker's two editions, this book not only examines the fundamentals of telecommunications regulation but also engages in advanced analysis of the key constitutional, administrative, and economic issues that arise in the various telecommunications settings. While building on Krattenmaker's foundation, the Benjamin/Lichtman/Shelanski text is an entirely new book. It covers new subjects -- for example, the text now includes case studies of digital television and low-power FM radio; a full chapter on direct broadcast satellite service; a chapter on telecommunications mergers; and several chapters on the Internet and advanced services regulation more generally. The book also covers familiar topics but in significantly greater depth. The telephone and cable materials, for example, have been expanded and completely rewritten, emphasizing key economic concepts that are carefully explained and then tied to the relevant legal and policy issues. In short, the new book mirrors the sweeping changes that have occurred in the field in recent years, yet maintains enough of Tom's original structure that faculty who have used the earlier two editions should find it easy to integrate the new text into the course they already love to teach. The authors have prepared a new teacher's manual, much longer than that previously available and filled with interesting questions and detailed suggestions for class discussion. The new manual also includes summaries of important aspects of the material, answers to questions posed in the book, and a host of model materials including syllabi and sample examinations. These materials should be useful to experienced and new teachers alike.
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