Archives For international trade

ITC Patent Cases Dramatically Drop, or Another Patent Litigation Myth Bites the Dust

Adam Mossoff —  13 November 2012

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.

In intellectual property, international trade, litigation, patent
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Specialization and Exchange, Georgia Chopsticks Edition

Josh Wright —  21 August 2011

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.

 

In economics, international trade
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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.

In antitrust, economics, international trade, merger guidelines, mergers & acquisitions, politics , ,
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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.

Continue Reading…

In copyright, intellectual property, international trade, law and economics, markets, Sykuta
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Never Let A Crisis Go To Waste, Vietnam Edition

Josh Wright —  22 December 2009

In light of economic worries in Vietnam, the WSJ reports that the country is soon likely to impose a widespread set of price controls and restrictions on political activity after an encouraging move toward freer markets:

Carlyle Thayer, a veteran Vietnam watcher and professor at the Australian Defense Academy in Canberra, says conservative factions in the ruling Politburo are tightening their grip on the country as Vietnam’s economic worries—especially inflation and fallout from currency devaluations—grow. He says he expects more crackdowns and arrests to come in the run-up to the country’s 2011 Party Congress, a major political event that will aim to map out Vietnam’s political and economic direction for the following five years.  In turn, the crackdowns threaten to curtail investment and economic growth in the country…..

Now, the price-control unit of Vietnam’s Finance Ministry is drafting proposals that, if implemented by the government, would compel private and foreign-owned companies to report pricing structures, according to documents viewed by The Wall Street Journal and corroborated by Vietnamese officials.  In some cases, the proposed rules would allow the government to set prices on a wide range of privately made or imported goods, including petroleum products, fertilizers and milk to help contain inflation as Vietnam continues pumping money into its volatile economy. Typically, the government applies this kind of aggressive measure only to state-owned businesses, and it is unclear whether Vietnam will write the wider rules into law.

Somewhat relatedly, here is one of my favorite papers about the economics of contractual relationships and enforcement institutions in Vietnam (McMillan & Woodruff).

In economics, international politics, international trade, markets
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International Signals: The Political Dimension of International Competition Law Harmonization

Geoffrey Manne —  31 August 2009

Seth Weinberger and I have a new article up at SSRN injecting some IR theory into the debate over international antitrust law.   Abstract:

The article, written jointly by a law professor and political science professor, endeavors to explain why the United States is particularly resistant to various efforts at international harmonization of antitrust law. While others have wrangled with this question over the years, none has assessed the question from within the broader political framework in which all relations between nations exist. Our article endeavors to fill this intellectual gap.

Existing efforts to describe or explain the lack of international harmonization have generally focused on the direct economic effects, and the narrow political difficulties, of the harmonization of competition laws through certain international mechanisms, most notably the WTO and the OECD. Largely absent in these accounts is a background theory of international politics against which the practicalities – and the ultimate desirability – of international competition law harmonization can be assessed. Our article presents such a theory. It places the conflict over international competition laws within the larger framework of international relations, and in so doing draws out some novel and important implications of the debate.

An important insight of this Article is that, largely independent of the economic calculus regarding the costs and benefits of entering into a multilateral international antitrust agreement, there is an inherent “transaction benefit” in the act of engaging in political exchange between states. Traditional economic and legal analyses of international relations have focused largely on the choice of organizational form (market exchange (no explicit agreement) versus bilateral versus multilateral institutions) and the likelihood and nature of compliance with each type in the absence of a central enforcement authority. By contrast, we strive here to develop a political theory of international law which accounts on the one hand for the costs of entering into international agreements, but also accounts for the state’s political preference for a specific form of agreement.

The novel implication of this understanding is that, by crafting international agreements in which the other parties are made to alter their domestic institutions as a condition of agreement, the dominant state (here, the United States) receives a credible commitment from the other state as to its willingness to adhere to the terms of the specific agreement under negotiation which, in the absence of centralized enforcement, might not otherwise be forthcoming. Additionally, the alteration of domestic institutions in a manner directed by the dominant state will in and of itself be viewed as a benefit of the agreement. By facilitating domestic normative change, the dominant state will gain a measure of transformative power from the change of domestic institutions. As a result, nations derive political benefits from international agreements in a way that transcends the substance of the agreements themselves.

The process of internationalizing and harmonizing competition law provides fertile ground in which to examine these ideas. Negotiations over antitrust policy are particularly important because as government barriers to trade have fallen they may well be replaced by private barriers. At the same time, as tariff barriers to trade have fallen, governments may resort to the discriminate application of antitrust law to maintain preferred local monopolies, and therefore to make payoffs to politically important constituents. The prospects for the illiberal application of antitrust laws and their economic importance make the debates over their form an issue of abiding concern for the process of global economic liberalization.

Get it while it’s hot!

In announcements, antitrust, international politics, international trade, law and economics, legal scholarship, national security, scholarship
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Trends in Protectionism

Josh Wright —  6 August 2009

Here’s a troubling paragraph from Chad Bown’s WSJ op-ed:

The count of newly imposed protectionist policies like antidumping duties and other “safeguard” measures increased by 31% in the first half of 2009 relative to the same period one year ago, which itself is not an alarming number. But many governments take more than a year to make final decisions on such policies after receiving the initial request for protection from a domestic industry. The fact that industry requests for new import restrictions were 34% higher in 2008 relative to 2007 is a worrying trend even though 2007 saw a historical low in such requests. And with the recession continuing, requests for new import restrictions were 19% higher in the first half of 2009 relative to 2008.  This suggests a wave of new protectionist measures may be on the way. While leaders of the Group of 20 large economies unanimously pledged not to resort to protectionism at a Washington summit last November and reaffirmed this in London in April, virtually all of them have slipped at least a little bit.

In economics, international trade
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Free Trade Petition

Josh Wright —  19 March 2009

Atlas Economic Research Foundation is circulating a petition in favor of free trade (HT Sasha Volokh).  The plan is to unveil the petition before the April 1 G20 meetings in London.  Here is the text of the petition.  You can sign it here if you are interested.

Free Trade Is the Best Policy

The specter of protectionism is rising.  It is always a dangerous and foolish policy, but it is especially dangerous at a time of economic crisis, when it threatens to damage the world economy.  Protectionism’s peculiar premise is that national prosperity is increased when government grants monopoly power to domestic producers.  As centuries of economic reasoning, historical experience, and empirical studies have repeatedly shown, that premise is dead wrong.  Protectionism creates poverty, not prosperity. Protectionism doesn’t even “protect” domestic jobs or industries; it destroys them, by harming export industries and industries that rely on imports to make their goods.  Raising the local prices of steel by “protecting” local steel companies just raises the cost of producing cars and the many other goods made with steel.  Protectionism is a fool’s game.

But the fact that protectionism destroys wealth is not its worst consequence.  Protectionism destroys peace.  That is justification enough for all people of good will, all friends of civilization, to speak out loudly and forcefully against economic nationalism, an ideology of conflict, based on ignorance and carried into practice by protectionism.

Two hundred and fifty years ago, Montesquieu observed that “Peace is the natural effect of trade. Two nations who differ with each other become reciprocally dependent; for if one has an interest in buying, the other has an interest in selling; and thus their union is founded on their mutual necessities.”

Trade’s most valuable product is peace.  Trade promotes peace, in part, by uniting different peoples in a common culture of commerce – a daily process of learning others’ languages, social norms, laws, expectations, wants, and talents.

Trade promotes peace by encouraging people to build bonds of mutually beneficial cooperation.  Just as trade unites the economic interests of Paris and Lyon, of Boston and Seattle, of Calcutta and Mumbai, trade also unites the economic interests of Paris and Portland, of Boston and Berlin, of Calcutta and Copenhagen – of the peoples of all nations who trade with other.

A great deal of rigorous empirical research supports the proposition that trade promotes peace.

Perhaps the most tragic example of what happens when that insight is ignored is World War II.

International trade collapsed by 70 percent between 1929 and 1932, in no small part because of America’s 1930 Smoot-Hawley tariff and the retaliatory tariffs of other nations.  Economist Martin Wolf notes that “this collapse in trade was a huge spur to the search for autarky and Lebensraum, most of all for Germany and Japan.”

The most ghastly and deadly wars in human history soon followed.

By reducing war, trade saves lives.

Trade saves lives also by increasing prosperity and extending it to more and more people.  The evidence that freer trade promotes prosperity is simply overwhelming. Prosperity enables ordinary men and women to lead longer and healthier lives.

And with longer, healthier lives lived more peacefully, people integrated into the global economy have more time to enjoy the vast array of cultural experiences brought to them by free trade.  Culture is enriched by contributions from around the world, made possible by free trade in goods and in ideas.

Without a doubt, free trade increases material prosperity.  But its greatest gift is not easily measured with money. That greatest gift is lives that are freer, fuller, and far less likely to be scalded or destroyed by the atrocities of war.

Accordingly, we the undersigned join together in a plea to the governments of all nations to resist the calls of the short-sighted and the greedy to raise higher the barriers to trade.  In addition, we call on them to tear down current protectionist barriers to free trade. To each government, we say: let your citizens enjoy not only the fruits of your own fields, factories, and genius, but also those of the entire globe.  The rewards will be greater prosperity, richer lives, and enjoyment of the blessings of peace.

In economics, international politics, international trade, markets, politics
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Microsoft Again. Really? Why?

Josh Wright —  20 January 2009

DG Comp is after Microsoft. Again. Here is the EU’s press release which states the obvious about the basis of the Statement of Objections : the Commission’s decision in the Windows Media Player decision renders illegal virtually any tie by a firm with a “dominant” share under EU law. Therefore, Microsoft’s inclusion of Internet Explorer in Windows (yes, the same one that was the basis of the old U.S. DOJ case) is therefore clearly illegal. Here’s how the Commission puts it:

The SO is based on the legal and economic principles established in the judgment of the Court of First Instance of 17 September 2007 (case T-201/04), in which the Court of First Instance upheld the Commission’s decision of March 2004 (see IP/04/382), finding that Microsoft had abused its dominant position in the PC operating system market by tying Windows Media Player to its Windows PC operating system (see MEMO/07/359).

The evidence gathered during the investigation leads the Commission to believe that the tying of Internet Explorer with Windows, which makes Internet Explorer available on 90% of the world’s PCs, distorts competition on the merits between competing web browsers insofar as it provides Internet Explorer with an artificial distribution advantage which other web browsers are unable to match. The Commission is concerned that through the tying, Microsoft shields Internet Explorer from head to head competition with other browsers which is detrimental to the pace of product innovation and to the quality of products which consumers ultimately obtain. In addition, the Commission is concerned that the ubiquity of Internet Explorer creates artificial incentives for content providers and software developers to design websites or software primarily for Internet Explorer which ultimately risks undermining competition and innovation in the provision of services to consumers.

What’s going on here? Why Microsoft again when its share in the browser market is shrinking and its already paid the piper more than once? Let’s start with some obvious points by way of background. First, there is virtually no way that Microsoft can win if they fight this — in the sense that the liability determination is a foregone conclusion. Despite all the talk of evidence gathering in the press release, in the context of the analysis in the CFI Windows Media Player decision, I suspect that there is not any evidence that an investigation could generate (including evidence that the conduct significantly improves consumer outcomes) that would allow Microsoft to escape liability. Second, press reports indicate that Microsoft’s new strategy with the EU has been, not to put too fine a point on it, to lay down and wait until the beating stops. Third, the ubiquity of tying arrangements by firms with significant market shares (and those without) implies significant prosecutorial discretion for DG Comp. The presence of a significant number of US based firms in technology markets (e.g. Microsoft, Qualcomm, Intel) has led some to argue that there is some protectionist-based geographical discrimination in the selection of targets. Fifth, it seems quite obvious that DG Comp is trying to send some message with its selection of Microsoft as a target, again, in the same case that the US brought years ago. The interesting part is figuring out what the statement is.

Here are a few theories of what that statement might be:

  1. DG Comp is taking the lead as world antitrust enforcer — especially with respect to monopolization
  2. Relatedly, the US Section 2 approach and remedies) are insufficient to police global monopolists and, i.e. so weak that Microsoft was able to violate stricter EC law even after the consent decree
  3. Protectionism and Public choice: Microsoft is a high profile, U.S. company that will pay the fines (beware Intel, Qualcomm, and other large US firms selling globally with significant shares…)

What’s interesting to me is the timing relative to the incoming Obama antitrust regime. By all accounts, or at least my own (see also here), the U.S. is about to start its most active monopolization enforcement regime in decades. With Professor Elhauge at the controls of the DOJ, I suspect the change in course will be significant and visible. So if (1) is the story, one wonders what sort of competition this might engender, if any, between the US and EU enforcers. Or perhaps the story is not competition but convergence in the US towards EU-style monopolization enforcement? I do think there is something to all three stories. And with respect to (3), yes I know there has been Article 82 enforcement against non-US firms, but I’d like to see shares calculated on a dollar fine basis when the EU is through with Qualcomm and Intel. Mostly, given the prior scuffle between Tom Barnett and Neelie Kroes on the CFI Judgment in the Media Player case, its hard to think that (2) is not a significant part of the story. And perhaps rather than competition with the US, motivation for convergence.

In antitrust, economics, international politics, international trade, regulation, technology
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George W. Bush's stinky parting gift

Geoffrey Manne —  20 January 2009

Bush has proved himself to be a statist, protectionist ignoramus on many occasions.  But this, one of his final acts in office, is simply appalling:

People in the southern French district of Lozeyron are having a hard time swallowing US President George W. Bush’s parting gift: a tripling to 300 percent in import duty on their world-famous Roquefort cheese.

“Tonnes of produce are going to go up in smoke,” protested one of the seven local producers of the distinctive soft blue cheese. It was a hammer blow to the local region, he said.

The swingeing tariff increase, part of a longstanding trade row between the United States and the European Union, has effectively priced them out of the US market, say producers.

It’s both protectionist idocy as well as an affront to cheese lovers everywhere.  Gordon–are you reading this!?!?!

What an ass.  Good riddance.

In international politics, international trade, markets, regulation
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