Archives For international trade

Today, the International Center for Law & Economics released a white paper, co-authored by Executive Director Geoffrey Manne and Senior Fellow Julian Morris, entitled Dangerous Exception: The detrimental effects of including “fair use” copyright exceptions in free trade agreements.

Dangerous Exception explores the relationship between copyright, creativity and economic development in a networked global marketplace. In particular, it examines the evidence for and against mandating a U.S.-style fair use exception to copyright via free trade agreements like the Trans-Pacific Partnership (TPP), and through “fast-track” trade promotion authority (TPA).

In the context of these ongoing trade negotiations, some organizations have been advocating for the inclusion of dramatically expanded copyright exceptions in place of more limited language requiring that such exceptions conform to the “three-step test” implemented by the 1994 TRIPs Agreement.

The paper argues that if broad fair use exceptions are infused into trade agreements they could increase piracy and discourage artistic creation and innovation — especially in nations without a strong legal tradition implementing such provisions.

The expansion of digital networks across borders, combined with historically weak copyright enforcement in many nations, poses a major challenge to a broadened fair use exception. The modern digital economy calls for appropriate, but limited, copyright exceptions — not their expansion.

The white paper is available here. For some of our previous work on related issues, see:

Last week, the George Washington University Center for Regulatory Studies convened a Conference (GW Conference) on the Status of Transatlantic Trade and Investment Partnership (TTIP) Negotiations between the European Union (EU) and the United States (U.S.), which were launched in 2013 and will continue for an indefinite period of time. In launching TTIP, the Obama Administration claimed that this pact would raise economic welfare in the U.S. and the EU through stimulating investment and lowering non-tariff barriers between the two jurisdictions, by, among other measures, “significantly cut[ting] the cost of differences in [European Union and United States] regulation and standards by promoting greater compatibility, transparency, and cooperation.

Whether TTIP, if enacted, would actually raise economic welfare in the United States is an open question, however. As a recent Heritage Foundation analysis of TTIP explained, a TTIP focus on “harmonizing” regulations could actually lower economic freedom (and welfare) by “regulating upward” through acceptance of the more intrusive approach, and by precluding future competition among alternative regulatory models that could lead to welfare-enhancing regulatory improvements. Thus, the Heritage study recommended that “[a]ny [TTIP] agreement should be based on mutual recognition, not harmonization, of regulations.”

Unfortunately, discussion at the GW Conference indicated that the welfare-superior mutual recognition approach has been rejected by negotiators – at least as of now. In response to a question I posed on the benefits of mutual recognition, an EU official responded that such an “academic” approach is not “realistic,” while a senior U.S. TTIP negotiator indicated that mutual recognition could prove difficult where regulatory approaches differ. I read those diplomatically couched responses as signaling that both sides opposed the mutual recognition approach. This is a real problem. As part of TTIP, U.S. and EU sector-specific regulators are actively engaged in discussing regulatory particulars. There is the distinct possibility that the regulators may agree on measures that raise regulatory burdens for the sectors covered – particularly given the oft-repeated motto at the GW Conference that TTIP must not reduce existing levels of “protection” for health, safety, and the environment. (Those blandishments eschew any cost-benefit calculus to justify existing protection levels.) This conclusion is further supported by public choice theory, which suggests that regulators may be expected to focus on expanding the size and scope of their regulatory domains, not on contracting them. To make things worse, TTIP raises the possibility that the highly successful U.S. tradition of reliance on private sector-led voluntary consensus standards, as opposed to the EU’s preference for heavy government involvement in standard-setting policies, may be undermined. Any move toward greater direct government influence on U.S. standard setting as part of a TTIP bargain would further undermine the vibrancy, competition, and innovation that have led to the great international success of U.S.-developed technical standards.

As a practical matter, however, is there time for a change in direction in TTIP negotiations regarding regulation and standards? Yes, there is. The TTIP negotiators face no true deadline. Moreover, as a matter of political reality, the eventual U.S. statutory adoption of TTIP measures may require the passage by Congress of “fast-track” trade promotion authority (TPA), which provides for congressional up-or-down votes (without possibility of amendment) on legislation embodying trade deals that have been negotiated by the Executive Branch. Given the political sensitivity of trade deals, they cannot easily be renegotiated if they are altered by congressional amendments. (Indeed, in recent decades all major trade agreements requiring implementing legislation have proceeded under TPA.)

If the Obama Administration decides that it wants to advance TTIP, it must rely on a Republican-controlled Congress to obtain TPA. Before it grants such authority, Congress should conduct hearings and demand that Administration officials testify about key aspects of the Administration’s TTIP negotiating philosophy, and, in particular, on how U.S. TTIP negotiators are approaching regulatory differences between the U.S. and the EU. Congress should make it a prerequisite to the grant of TPA that the final TTIP agreement embody welfare-enhancing mutual recognition of regulations and standards, rather than welfare-reducing harmonization. It should vote down any TTIP negotiated deal that fails to satisfy this requirement.

Shanker Singham of the Babson Global Institute (formerly a leading international trade lawyer and author of the most comprehensive one-volume work on the interplay between competition and international trade policy) has published a short article introducing the concept of “enterprise cities.”  This article, which outlines an incentives-based, market-oriented approach to spurring economic development, is well worth reading.  A short summary follows.

Singham points out that the transition away from socialist command-and-control economies, accompanied by international trade liberalization, too often failed to create competitive markets within developing countries.  Anticompetitive market distortions imposed by government and generated by politically-connected domestic rent-seekers continue to thrive – measures such as entry barriers that favor entrenched incumbent firms, and other regulatory provisions that artificially favor specific powerful domestic business interests (“crony capitalists”).  Such widespread distortions reduce competition and discourage inward investment, thereby retarding innovation and economic growth and reducing consumer welfare.  Political influence exercised by the elite beneficiaries of the distortions may prevent legal reforms that would remove these regulatory obstacles to economic development.  What, then, can be done to disturb this welfare-inimical state of affairs, when sweeping, nationwide legal reforms are politically impossible?

One incremental approach, advanced by Professor Paul Romer and others, is the establishment of “charter cities” – geographic zones within a country that operate under government-approved free market-oriented charters, rather than under restrictive national laws.  Building on this concept, Babson Global Institute has established a “Competitiveness and Enterprise Development Project” (CEDP) designed to promote the notion of “Enterprise Cities” (ECs) – geographically demarcated zones of regulatory autonomy within countries, governed by a Board.  ECs would be created through negotiations between a national government and a third party group, such as CEDP.  The negotiations would establish “Regulatory Framework Agreements” embodying legal rules (implemented through statutory or constitutional amendments by the host country) that would apply solely within the EC.  Although EC legal regimes would differ with respect to minor details (reflecting local differences that would affect negotiations), they would be consistent in stressing freedom of contract, flexible labor markets, and robust property rights, and in prohibiting special regulatory/legal favoritism (so as to avoid anticompetitive market distortions).  Protecting foreign investment through third party arbitration and related guarantees would be key to garnering foreign investor interest in ECs.   The goal would be to foster a business climate favorable to investment, job creation, innovation, and economic growth.  The EC Board would ensure that agreed-to rules would be honored and enforced by EC-specific legal institutions, such as courts.

Because market-oriented EC rules will not affect market-distortive laws elsewhere within the host country, well-organized rent-seeking elites may not have as strong an incentive to oppose creating ECs.  Indeed, to the extent that a share of EC revenues is transferred to the host country government (depending upon the nature of the EC’s charter), elites might directly benefit, using their political connections to share in the profits.  In short, although setting up viable ECs is no easy matter, their establishment need not be politically unfeasible.  Indeed, the continued success of Hong Kong as a free market island within China (Hong Kong places first in the Heritage Foundation’s Index of Economic Freedom), operating under the Basic Law of Hong Kong, suggests the potential for ECs to thrive, despite having very different rules than the parent state’s legal regime.  (Moreover, the success of Hong Kong may have proven contagious, as China is now promoting a new Shanghai Free Trade Zone thaw would compete with Hong Kong and Singapore.)

The CEDP is currently negotiating the establishment of ECs with a number of governments.  As Singham explains, successful launch of an EC requires:  (1) a committed developer; (2) land that can be used for a project; (3) a good external infrastructure connecting the EC with the rest of the country; and (4) “a government that recognizes the benefits to its reform agenda and to its own economic plan of such a designation of regulatory autonomy and is willing to confront its own challenges by thinking outside the box.”  While the fourth prerequisite may be the most difficult to achieve, internal pressures for faster economic growth and increased investment may lead jurisdictions with burdensome regulatory regimes to consider ECs.

Furthermore, as Singham stresses, by promoting competition on the merits, free from favoritism, a successful EC could stimulate successful entrepreneurship.  Scholarly work points to the importance of entrepreneurship to economic development.

Finally, the beneficial economic effects of ECs could give additional ammunition to national competition authorities as they advocate for less restrictive regulatory frameworks within their jurisdictions.  It could thereby render more effective the efforts of the many new national competition authorities, whose success in enhancing competitive conditions within their jurisdictions has been limited at best.

ECs are no panacea – they will not directly affect restrictive national regulatory laws that benefit privileged special interests but harm the overall economy.  However, to the extent they prove financial successes, over time they could play a crucial indirect role in enhancing competition, reducing inefficiency, and spurring economic growth within their host countries.

Paul H. Rubin and Joseph S. Rubin advance the provocative position that some crony capitalism may be welfare enhancing. With all due respect, I am not convinced by their defense of government-business cronyism.  “Second best correction” arguments can be made with respect to ANY inefficient government rule.  In reality, it is almost impossible to calibrate the degree of the distortion created by the initial regulation, so there is no way of stating credibly that the “counter-distortion” is on net favorable to society.  More fundamentally, such counter-distortions are the products of rent-seeking activities by firms and other interest groups, which care nothing about the net social surplus effects of the first and counter-distortion.  The problem with allowing counter-distortions is that firms that are harmed thereby (think of less politically connected companies that are hurt when a big player takes advantage of Export-Import Bank subsidies) either will suffer, or will lobby (using scarce resources) for “third-line” or “tertiary” distortions to alleviate the harmful effects of the initial counter-distortions.  Those new distortions in turn will spawn a continuing series of responses, causing additional unanticipated consequences and attendant welfare losses.

It follows that the best policy is not to defend counter-distortions, which very seldom if ever (and then only through sheer chance) appropriately offset the initial distortions.  (Since the counter-distortions will be rife with new regulatory complexities, they are bound to be costly to implement and highly likely to be destructive of social surplus.)  Rather, the best, simplest, and cleanest policy is to work to get rid of the initial distortions.  If companies complain about other policies that hurt them (generated, for instance, by the Foreign Corrupt Practices Act, or by Food and Drug Administration regulatory delays), the answer is to reform or repeal those bad policies, not to retain inherently welfare-distortive laws such as the Ex-Im Bank authorization.  The alternative approach would devolve into a justification for a web of ever more complex and intrusive federal regulations and interest group-generated “carve-outs.”

This logic applies generally.  For example, the best solution to the welfare-reducing effect of particular Obamacare mandates is not to create a patchwork of exceptions for certain politically-favored businesses and labor groups, but, rather, to repeal counterproductive government-induced health care market distortions.  Similarly, the answer to an economically damaging tax code is not to create a patchwork of credits for politically-favored industries, but, rather, to simplify the code and apply it neutrally, thereby promoting economic growth across industry sectors.

The argument that Ex-Im Bank activities are an example of a “welfare-enhancing” counter-distortion is particularly strained, given the fact that most U.S. exporters gain no benefits from Ex-Im Bank funding, while the American taxpayer foots the bill.  Indeed, capital is diverted away from “unlucky” exporters to the politically connected few who know how to play the Washington game (well-capitalized companies that are least in need of the taxpayer’s largesse).  As stated by Doug Bandow in Forbes, “[n]o doubt, Exim financing makes some deals work.  But others die because ExIm diverts credit from firms without agency backing.  Unfortunately, it is easier to see the benefits of the former than the costs of the latter.”  In short, the recitation of Ex-Im Bank’s alleged “benefits” to American exporters who are “seen” ignores the harm imposed on other “unseen” American companies and taxpayers.  (What’s more, responding to Ex-Im Bank, foreign governments are incentivized to impose their own subsidy programs to counteract the Ex-Im Bank subsidies.)  Thus, the case for retaining Ex-Im Bank is nothing more than another example of Bastiat’s “broken window” fallacy.     

In sum, the goal should be to simplify legal structures and repeal welfare-inimical laws and regulations, not try to correct them through new inherently flawed regulatory intrusions.  In my view, the only examples of rent-seeking that might yield net social benefits are those associated with regulatory reform (such as the expiration of the Ex-Im Bank authorization) or with the creation of new markets (as Gordon Brady and I have argued).

Over at the blog for the Center for the Protection of Intellectual Property, Richard Epstein has posted a lengthy essay that critiques the Obama Administration’s decision this past August 3 to veto the exclusion order issued by the International Trade Commission (ITC) in the Samsung v. Apple dispute filed there (ITC Investigation No. 794).  In his essay, The Dangerous Adventurism of the United States Trade Representative: Lifting the Ban against Apple Products Unnecessarily Opens a Can of Worms in Patent Law, Epstein rightly identifies how the 3-page letter issued to the ITC creates tremendous institutional and legal troubles in the name an unverified theory about “patent holdup” invoked in the name of an equally overgeneralized and vague belief in the “public interest.”

Here’s a taste:

The choice in question here thus boils down to whether the low rate of voluntary failure justifies the introduction of an expensive and error-filled judicial process that gives all parties the incentive to posture before a public agency that has more business than it can possibly handle. It is on this matter critical to remember that all standards issues are not the same as this particularly nasty, high-stake dispute between two behemoths whose vital interests make this a highly atypical standard-setting dispute. Yet at no point in the Trade Representative’s report is there any mention of how this mega-dispute might be an outlier. Indeed, without so much as a single reference to its own limited institutional role, the decision uses a short three-page document to set out a dogmatic position on issues on which there is, as I have argued elsewhere, good reason to be suspicious of the overwrought claims of the White House on a point that is, to say the least, fraught with political intrigue

Ironically, there was, moreover a way to write this opinion that could have narrowed the dispute and exposed for public deliberation a point that does require serious consideration. The thoughtful dissenting opinion of Commissioner Pinkert pointed the way. Commissioner Pinkert contended that the key factor weighing against granting Samsung an exclusion order is that Samsung in its FRAND negotiations demanded from Apple rights to use certain non standard-essential patents as part of the overall deal. In this view, the introduction of nonprice terms on nonstandard patterns represents an abuse of the FRAND standard. Assume for the moment that this contention is indeed correct, and the magnitude of the problem is cut a hundred or a thousand fold. This particular objection is easy to police and companies will know that they cannot introduce collateral matters into their negotiations over standards, at which point the massive and pointless overkill of the Trade Representative’s order is largely eliminated. No longer do we have to treat as gospel truth the highly dubious assertions about the behavior of key parties to standard-setting disputes.

But is Pinkert correct? On the one side, it is possible to invoke a monopoly leverage theory similar to that used in some tie-in cases to block this extension. But those theories are themselves tricky to apply, and the counter argument could well be that the addition of new terms expands the bargaining space and thus increases the likelihood of an agreement. To answer that question to my mind requires some close attention to the actual and customary dynamics of these negotiations, which could easily vary across different standards. I would want to reserve judgment on a question this complex, and I think that the Trade Representative would have done everyone a great service if he had addressed the hard question. But what we have instead is a grand political overgeneralization that reflects a simple-minded and erroneous view of current practices.

You can read the essay at CPIP’s blog here, or you can download a PDF of the white paper version here (please feel free to distribute digitally or in hardcopy).


Over at Law360 I have a piece on patent enforcement at the ITC (gated), focusing on the ITC’s two Apple-Samsung cases: one in which the the ITC issued a final determination in which it found Apple to have infringed one of Samsung’s 3G-related SEPs, and the other (awaiting a final determination from the Commission) in which an ALJ found Samsung infringed four of Apple’s patents, including a design patent. Here’s a taste:

In fact, there is a strong argument in favor of ITC adjudication of FRAND-encumbered patents. As the name suggests, FRAND-encumbered patents must be licensed by their owners on reasonable, nondiscriminatory terms. Despite Apple’s claims that Samsung refused to negotiate, this seems unlikely (and the ITC found otherwise, of course). What’s more, post-adjudication, the FRAND requirement associated with a FRAND-encumbered patent remains.

As a result, negotiation over license terms for FRAND-encumbered patents can only be more likely than for other patents on which there is no duty to negotiate. Agreement over terms is similarly more likely as FRAND narrows the bargaining range for patent holders. What that means is that (1) avoiding a possible ITC exclusion order ex ante is a simple matter of entering into negotiations and licensing, an outcome that is required by FRAND, and (2) ex post (that is, after an exclusion order is issued), reinstating the ability to import and sell otherwise-infringing devices is also more readily accomplished, likewise through obligatory negotiation and licensing.

* * *

The ITC’s threat of injunctive relief can impel negotiation and licensing in all contexts, of course. But the absence of monetary damages, coupled with the inherent uncertainties surrounding design patents, the broad scope of enforcement and the vagaries of CBP’s implementation of ITC orders, is significantly more troubling in the design patent context. Thus, contrary to many critics’ assertions, the White House’s recent proposal and pending bills in Congress, it is actually FRAND-encumbered SEPs that are most amenable to adjudication and enforcement by the ITC

As they say, read the whole thing.

Coincidentally, Verizon’s general counsel, Randal Milch, has an op-ed on the same topic in today’s Wall Street Journal. Notes Milch:

What we have warned is that patent litigation at the ITC—where the only remedy is to keep products from the American public—is too high-stakes a game for patent disputes. The fact that the ITC’s intellectual-property-dispute docket has nearly quadrupled over 15 years only raises the stakes further. Smartphone patent litigation accounts for a substantial share of that increase.

Here are three instances under which the president should veto an exclusion order:

  • When the patent holder isn’t practicing the technology itself. Courts have routinely found shutdown relief inappropriate for non-practicing entities. Patent trolls shouldn’t be permitted to exclude products from our shores.
  • When the patent holder has already agreed to license the patent on reasonable terms as part of standards setting. If the patent holder has previously agreed that a reasonable licensing fee is all it needs to be made whole, it shouldn’t get shutdown relief at the ITC.
  • When the infringing piece of the product isn’t that important to the overall product, and doesn’t drive consumer demand for the product at issue. There are more than 250,000 patents relevant to today’s smartphones. It makes no sense that exclusion could occur for infringement of the most minor patent.

Obviously, the second of these is implicated in the ITC’s SEP case. But, as I have noted before, this ignores (and exacerbates) the problem of reverse holdup—where potential licensees refuse to license on reasonable terms. As the ITC noted in the Apple-Samsung SEP case:

The ALJ found that the evidence did not support a conclusion that Samsung failed to offer Apple a license on FRAND terms.


Apple argues that Samsung was obligated to make an initial offer to Apple of a specific fair and reasonable royalty rate. The evidence on record does not support Apple’s position….Further, there is no legal authority for Apple’s argument. Indeed, the limited precedent on the issue appears to indicate that an initial offer need not be the terms of a final FRAND license because the SSO intends the final license to be accomplished through negotiation. See Microsoft Corp. v. Motorola, Inc. (because SSOs contemplated that RAND terms be determined through negotiation, “it logically does not follow that initial offers must be on RAND terms”) [citation omitted].


Apple’s position illustrates the potential problem of so-called reverse patent hold-up, a concern identified in many of the public comments received by the Commission.20 In reverse patent hold-up, an implementer utilizes declared-essential technology without compensation to the patent owner under the guise that the patent owner’s offers to license were not fair or reasonable. The patent owner is therefore forced to defend its rights through expensive litigation. In the meantime, the patent owner is deprived of the exclusionary remedy that should normally flow when a party refuses to pay for the use of a patented invention.

One other note, on the point about the increase in patent litigation: This needs to be understood in context. As this article notes:

Over the last 40 years the number of patent lawsuits filed in the US has stayed relatively constant as a percentage of patents issued.

And the accompanying charts paint the picture even more clearly. Perhaps the numbers at the ITC would look somewhat different, as it seems to have increased in importance as a locus of patent litigation activity. But the larger point about the purported excess of patent litigation remains. I hasten to add that this doesn’t mean that the system is perfect, in particular (as my Law360 piece notes) with respect to the issuance and enforcement of design patents. But that may be an argument for USPTO reform, design patent reform, and/or, as Scott Kieff (who, by the way, finally got a hearing last week on his nomination by President Obama to be a member of the ITC) has argued, targeted reforms of the presumption of validity and fee-shifting. But it’s not a strong argument against injunctive remedies (at the ITC or elsewhere) in SEP cases.

Patent Activity by Year (in Terms of Applications Filed, Patents Issued and Lawsuits Filed)

Patent Activity by Year (in Terms of Applications Filed, Patents Issued and Lawsuits Filed)

Patent Lawsuits Normalized Against Patents Issued and Applications Filed

Patent Lawsuits Normalized Against Patents Issued and Applications Filed

Patent Activity by Year (in Terms of Applications Filed, Patents Issued and Lawsuits Filed), 5-year Moving Averages

Patent Activity by Year (in Terms of Applications Filed, Patents Issued and Lawsuits Filed), 5-year Moving Averages

The claim that there is a “patent litigation explosion” is a myth, but there’s a related patent litigation myth that has proven cantankerously resilient in the patent policy debates — there’s an “explosion” of patent-owners racing to the International Trade Commission (ITC) who are obtaining exclusion orders against infringers.

Well, this argument has crashed and burned against the hard facts of the actual numbers, but even before patent filings at the ITC dropped, this argument was still problematic.

The reason is that it was an example of a great game that we all learn in college: fun with statistics!  It’s the old rhetorical saw: If actual numbers don’t make something look bad, then just reframe the point as an out-of-context statistical claim and now it sounds like a complete disaster that demands immediate action by everyone—by Congress, by courts, and, given that the season is almost upon us, by Santa Claus (who should punish these allegedly rent-seeking patent-owners with coal in their stockings).

You may think I jest, but it’s common fare for commentators and academics to paint the situation in the ITC entirely in terms of statistical increases by patent-owners.  To take but one representative example from a 2009 academic article:

The ITC has become a popular forum for enforcing patents, with the number of actions increasing by nearly 80% since 2003.

An 80% increase in patent filings in six years!  This is clearly a litigation hurricane of historic proportions!  We must do something about this before the ITC is flooded like New York City was by Hurricane Sandy!

Yet, when one looks behind the statistics at the actual numbers, it’s almost laughable that numerous law journal articles, newspaper articles, and blog postings are breathlessly reporting on this as if this is a pressing policy problem in both the patent system and the ITC.  Congress even spent more taxpayer dollars holding hearings this past summer on this allegedly pressing problem, and what a waste of time this was.

Here’s the actual numbers behind the statistics: From 2003 to 2009 (fiscal year), patent filings in the ITC increased from 19 to 29.  In the ten years from 2001 to 2011, patent case filings in the ITC went from 29 to 70.  (Note the drop between 2001 and 2003, a drop that has occurred again and to which we will return shortly.)

So, commentators and academics want Congress to change the law to make it harder for patent-owners to seek relief at the ITC because patent filings increased in ten years from 29 cases to 70 cases.  Alas, 70 total cases doesn’t sound too bad, especially when hundreds of thousands of lawsuits and other regulatory cases are filed annually.  So, the easy answer to this problem is to reframe rhetorically the total cases: the shift from 29 to 70 cases is an increase of 141%!  In ten years!  Yep, fun with statistics.

But even if one thinks for some strange reason that 70 cases is a huge number of filings at the ITC, this is still an out-of-context assertion that doesn’t mean anything.  As empirical economists and statisticians always ask: What’s the baseline?

One good baseline is to compare ITC filings to patent infringement cases filed in plain-old-vanilla federal court. How many patent infringement cases are filed each year in federal court?  In 2010, the total number of patent infringement lawsuits was 3,605 cases.  Yes, you read that number right: 3,605 cases.  (That’s the last year for which we have numbers.)  And before readers jump to the conclusion that 3,605 cases is an unmitigated patent litigation explosion, this would be incorrect as well — as I explained in a previous blog posting, patent litigation rates today are approximately the same or less than the patent litigation rates from 1790 to 1860.

In sum, we’re supposed to be filled with shock and awe by the 70 patent cases that were filed in the ITC in 2011, as compared to the 3,605 cases filed in federal court.  These 70 patents cases at the ITC, we’re told, demand immediate congressional action to impose a regime change on the ITC in limiting its jurisdiction over patents.  To put it bluntly, people are getting their patent policy knickers in a twist because 1.94% of total patent infringement cases are also being filed in the ITC.  Yep, fun with statistics.

And as Billy Mays would say: But wait, there’s more!  (That OxiClean was definitely worth it.  My sneakers were never so clean.)

Lest one still thinks that the number of patent filings in the ITC is a problem, the ITC released last month its fiscal-year 2012 report on patent filings — a report that got about as much attention as a report on dryer lint accumulations in fiscal-year 2012.  Given the ongoing uproar over patent filings in the ITC, one would expect that the ITC’s report would be have been trumpeted in news articles, blog postings, and by the commentators and academics who have been singing this tune for the past several years.

Nope, not a single peep about this report has been made in the more-than-30 days since its release.  Why the silence — the deafening silence — about the most recent data from the ITC on patent filings?

The reason is simple: the facts in the latest ITC fiscal-year report don’t fit the policy narrative.  The ITC reported that patent cases filed in the ITC dropped from a high of 70 cases in 2011 to a total of 48 cases in 2012 (fiscal year).  In the statistical terms loved so much by the critics of patent filings at the ITC, patent filings dropped by 31.4% between 2011 and 2012 (fiscal years).  Now that’s an interesting statistical number about which much could be said — or, as is the case, not said and ignored in the hope that it’ll just go away.

So, what happened to the loud, incessant complaints about skyrocketing patent filings in the ITC?  Well, to paraphrase the old man at the end of every Scooby Doo episode: And I would have gotten away with it, too, if it wasn’t for you meddling facts!

UPDATE: I made some minor copy-edit changes to the text after I posted it.

From the Economist, and courtesy of Craig Newmark:

Enter Georgia Chopsticks. Jae Lee, a former scrap-metal exporter, saw an opportunity and began turning out chopsticks for the Chinese market late last year. He and his co-owner, David Hughes, make their chopsticks from poplar and sweet-gum trees, which have the requisite flexibility and toughness, and are abundant throughout Georgia.

In May Georgia Chopsticks moved to larger premises in Americus, a location that offered room to grow, inexpensive facilities and a willing workforce. Sumter County, of which Americus is the seat, has an unemployment rate of more than 12%. Georgia Chopsticks now employs 81 people turning out 2m chopsticks a day. By year’s end Mr Lee and Mr Hughes hope to increase their workforce to 150, and dream of building a “manufacturing incubator” to help foreign firms take advantage of Georgia’s workforce and raw materials.


Merger Retrospective

Steve Salop —  4 April 2011

Several years ago, the DOJ cleared a merger between Whirlpool and Maytag.   The primary defense was that post-merger prices could not rise because of intense competition from foreign competitors like LG and Samsung. Apparently the actual competition was more than Whirlpool wanted to bear.  Guess What?  Mr. Laissez-Faire Antitrust, meet Dr. Public Choice.  The Wall Street Journal has reported that Whirlpool has filed a dumping complaint against LG and Samsung.   Whirlpool’s dumping complaint involves refrigerators and the merger concerns involved washers and dryers more than refrigerators.  But, the complaint sends a signal to LG and Samsung.  The comlaint also certainly does raise a caution about relying on foreign competition, and suggests a potential remedial provision.

Copyright Conundrum

Michael Sykuta —  4 August 2010

Earlier this year, the US Supreme Court granted a writ of certiorari to Costco in the case of OMEGA SA v. Costco Wholesale Corp. (541 F. 3d 982 (2008)).  At issue is whether the ‘first sale doctrine’ of US copyright law (17 U.S.C. § 109(a)), which limits the copyright owner’s ability to restrict distribution of its product after first sale, applies to foreign-manufactured products whose first sale was outside the U.S. and whose importation to the U.S. was not authorized by the manufacturer. (I happened to run across a July 31 op-ed by Eric Felten at the WSJ lamenting the potential for the case to limit the ability of libraries to lend books, particularly books originally published and purchased overseas.) The case raises some interesting issues about the role and purpose of copyright protection, segregated market price discrimination in a global economy, and the role of the gray markets in arbitraging global price disparities.

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