Table of Contents

Audit Quality in Regulatory Regimes

Fabian Kuehnhausen, Max Planck Institute for Innovation and Competition, International Max Planck Research School for Competition and Innovation, Ludwig-Maximilians-Universität München - Munich Graduate School of Economics (MGSE)

Litigating Intellectual Property Rights in Investor-State Arbitration: From Plain Packaging to Patent Revocation

Henning Grosse Ruse-Khan, University of Cambridge - Faculty of Law, Max Planck Institute for Innovation and Competition

Invalid But Infringed? An Analysis of Germany's Bifurcated Patent Litigation System

Katrin Cremers, Center for European Economic Research (ZEW)
Fabian Gaessler, Max Planck Institute for Innovation and Competition
Dietmar Harhoff, Max Planck Institute for Innovation and Competition, Ludwig-Maximilians-Universität München, Centre for Economic Policy Research (CEPR)
Christian Helmers, Santa Clara University - Leavey School of Business, Universidad Carlos III de Madrid

The End of (Meta) Search Engines in Europe?

Martin Husovec, International Max Planck Research School for Competition and Innovation

Competition Law in Media Markets and its Contribution to Democracy – A Global Perspective

Josef Drexl, Max Planck Institute for Innovation and Competition, Ludwig-Maximilians-Universität München


MAX PLANCK INSTITUTE FOR INNOVATION & COMPETITION
RESEARCH PAPER SERIES

"Audit Quality in Regulatory Regimes" Free Download
Max Planck Institute for Innovation & Competition Research Paper No. 14-12

FABIAN KUEHNHAUSEN, Max Planck Institute for Innovation and Competition, International Max Planck Research School for Competition and Innovation, Ludwig-Maximilians-Universität München - Munich Graduate School of Economics (MGSE)
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In this paper, I evaluate the impact of regulatory interventions on the quality of auditing services. Because of the recent financial crisis the European Commission has come up with proposals to introduce a Single Market for Statutory Audits. Hereby, the European Commission wants to open the audit services market to cross-border competition, to standardize provided services and it wants to allow for voluntary quality certification in order to reduce the adverse effects from asymmetric information about audit quality in the market. This paper investigates the impact of the EC proposals on social welfare and the well-functioning of the market. I set up a pair of signaling games to theoretically analyze the relationship between an auditor, a firm and a regulator. The analysis reveals that standardization of audit services is optimal if the costs for verifying quality are sufficiently low. On the other hand, certification leads to a separating equilibrium where only high-quality auditors certify. This regime maximizes social welfare whenever verification costs are large. The results are robust against a number of extensions.

"Litigating Intellectual Property Rights in Investor-State Arbitration: From Plain Packaging to Patent Revocation" Free Download
Fourth Biennial Global Conference of the Society of International Economic Law (SIEL) Working Paper No. 2014-21
Max Planck Institute for Innovation & Competition Research Paper No. 14-13
University of Cambridge Faculty of Law Research Paper No. 52/2014

HENNING GROSSE RUSE-KHAN, University of Cambridge - Faculty of Law, Max Planck Institute for Innovation and Competition
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Enforcing intellectual property rights abroad is difficult. International treaties have generally not created directly enforceable IP rights. Usually, the protection they confer cannot be directly invoked in national courts. Because of the territorial nature of IP protection, right holders must proceed in local courts based on local laws. Litigating IP rights abroad hence faces several hurdles.

International investment law offers some options to overcome these hurdles: It commonly includes IP rights in its protection for foreign investments against government interference. Often, investors can directly challenge host state measures in international arbitration proceedings. Relying on investment standards offers an alternative mechanism to protect IP rights abroad and is increasingly used to challenge the host state’s compliance with international IP treaties. However, arbitrators have on occasion denied their competence to rule on alleged breaches of an international IP agreement.

This article focusses on the investment interface aspect of IP: Compared to domestic proceedings (where international standards usually cannot be invoked), WTO dispute settlement (where right holders have no legal standing), and the protection of property under human rights instruments (where protection is limited to specific human rights standards), investor-state arbitration may be the only forum where right holders can litigate international IP norms such as the TRIPS Agreement. This may have significant effects on the autonomy of host states in responding to public interest concerns (such as access to medicines or reducing smoking) once measures affect IP rights of foreign investors. Reviewing the options for litigating international IP norms in investment disputes, I conclude that most routes pursued by right holders are unlikely to be successful. Ironically, it is only clauses in investment treaties which aim to safeguard flexibilities in the international IP system that are likely to open a door for challenging compliance with international IP obligations in investor-state arbitration.

"Invalid But Infringed? An Analysis of Germany's Bifurcated Patent Litigation System" Free Download
Max Planck Institute for Innovation & Competition Research Paper No. 14-14

KATRIN CREMERS, Center for European Economic Research (ZEW)
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FABIAN GAESSLER, Max Planck Institute for Innovation and Competition
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DIETMAR HARHOFF, Max Planck Institute for Innovation and Competition, Ludwig-Maximilians-Universität München, Centre for Economic Policy Research (CEPR)
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CHRISTIAN HELMERS, Santa Clara University - Leavey School of Business, Universidad Carlos III de Madrid
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We analyze the impact of the probabilistic nature of patents on the functioning of Germany’s bifurcated patent litigation system where infringement and validity of a patent are decided independently by different courts. We show that bifurcation creates situations in which a patent is held infringed that is subsequently invalidated. Our conservative estimates indicate that 12% of infringement cases in which the patent’s validity is challenged produce such ‘invalid but infringed’ decisions. We also show that having to challenge a patent’s validity in separate court proceedings means that more resource-constrained alleged infringers are less likely to do so. We find evidence that ‘invalid but infringed’ decisions create uncertainty which firms that were found to infringe an invalid patent attempt to reduce by filing more oppositions against newly granted patents immediately afterwards.

"The End of (Meta) Search Engines in Europe?" Free Download
Forthcoming in 14 Chi.-Kent J. Intell. Prop.
Max Planck Institute for Innovation & Competition Research Paper No. 14-15

MARTIN HUSOVEC, International Max Planck Research School for Competition and Innovation
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The technology behind the meta search engines supports countless number of Internet services ranging from the price and quality comparison websites to more sophisticated traffic connection finders and general search engines like Google. Meta search engines generally increase market transparency, intensify competition and decrease transaction costs of consumers. Because they are also capable of disturbing established business models of the indexed websites, a number of lawsuits were filed against the various operators of meta search engines over the last years in Europe. The scrutiny of the operation of some of them was recently even escalated to the Court of Justice of the European Union. In December 2013, the Court handed down its Innoweb C-202/12 ruling, where it held that operation of meta search engines is likely to infringe the database right of the indexed websites, assuming that they constitute a protectable subject matter. This paper therefore analyses the legal and practical consequences of this landmark decision for innovation, consumers and e-commerce in general.

This investigation then comes to the following conclusions: meta search engines sourcing product and price information from websites that directly sell services/goods are not likely to be affected by the decision due to lack of database protection of the used parts. On the other hand, meta search engines that source user generated content are likely to be affected and will need to acquire the licenses from the database owners. It is submitted that the Innoweb decision might increase the barriers-to-entry by prescribing licensing deals for new entrants, what may negatively impact the competition between different meta search engines and thus ironically foster the position of meta search incumbents. And also that this newly acquired blocking right will be mostly invoked in the Member States with a monopolistic structure of the indexed industries and serve predominantly as a tool to prevent the competition, rather than a new licensing opportunity. Last but not least, it is argued that the Directive 2006/114/EC concerning misleading and comparative advertising could remedy this inconsistency by serving as an external limit (an exception) to the sui generis protection in some scenarios.

"Competition Law in Media Markets and its Contribution to Democracy – A Global Perspective" Free Download
Max Planck Institute for Innovation & Competition Research Paper No. 14-16

JOSEF DREXL, Max Planck Institute for Innovation and Competition, Ludwig-Maximilians-Universität München
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Beyond regulating markets, competition law also has a political dimension. This is especially the case in media markets, where competition policy may produce particular trade-offs for the development of democracy. Yet it is a different question whether competition law enforcement should take democracy into account as a goal and, even more so, whether this goal should influence the analytical framework for applying competition law. By putting a focus on emerging and developing economies, this article answers this question in the affirmative. It thereby builds on a recent study conducted for the World Intellectual Property Organization (WIPO) on the application of competition laws around the world to copyright-related markets. Whereas, in the past, the interface of competition law and democracy was mostly discussed with regard to media mergers, an analysis of some unilateral conduct cases shows that the ‘democratic goal’ can argue either for or against intervention. Yet promoting the goal of democracy will not conflict with an economics-based analysis of competition law if, based on an evolutionary concept of competition, enforcers promote diversity of content and ideas in copyright-related media markets. In addition, the article highlights the need of independent agencies to guarantee credibility of competition law enforcement in media markets.

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About this eJournal

The Max Planck Institute for Innovation and Competition Research Paper Series is a source for research papers authored by the Max Planck Institute for Innovation and Competition academic staff (Eds.: Prof. Josef Drexl, Exec. Dir., Prof. Dietmar Harhoff, Dir., Prof. Reto M. Hilty, Dir.). Papers cover topics on intellectual property law (copyright, patent, trademark law), competition law (law of unfair competition, antitrust law), innovation research and entrepreneurship. To access all the papers in this series please use the following URL: http://www.ssrn.com/link/Max-Planck-Intellectual-RES.html

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