On Feb 12th ICLE President & Founder Geoffrey Manne joined Olivier Blanchard, Senior Analyst at Futurum Research on the Federalist Society Teleforum Podcast. On the podcast, they discussed the pending decision in the FTC’s controversial Section 5 lawsuit against Qualcomm.

Among other things, the FTC is seeking to permanently enjoin Qualcomm from engaging in certain industry-wide patent licensing practices, which the FTC alleges impair competition in violation of the antitrust laws. However, it has been argued that the FTC’s novel theory fails to meet the burden of proof by showing actual evidence of harm, as clarified recently by the US Supreme Court in Ohio v. American Express Co. The consequences of FTC’s legal theory, if upheld by the court, could reach well-beyond patent licensing arrangements.  Indeed, some experts fear that changes to Qualcomm’s business model will undermine U.S. national security interests and cede American leadership in the 5G race to a foreign adversary—the same concerns echoed last year by the Committee on Foreign Investment in the United States (CFIUS) when it recommended that the President permanently prohibit Broadcom from acquiring Qualcomm.

The full episode is embedded below.

An important but unheralded announcement was made on October 10, 2018: The European Committee for Standardization (CEN) and the European Committee for Electrotechnical Standardization (CENELEC) released a draft CEN CENELAC Workshop Agreement (CWA) on the licensing of Standard Essential Patents (SEPs) for 5G/Internet of Things (IoT) applications. The final agreement, due to be published in early 2019, is likely to have significant implications for the development and roll-out of both 5G and IoT applications.

Read the full piece here.

Last week, the UK Court of Appeal upheld the findings of the High Court in an important case regarding standard essential patents (SEPs). Of particular significance, the Court of Appeal upheld the finding that the defendant, an implementer of SEPs, could have the sale of its products enjoined in the UK unless it enters into a global licensing deal on terms deemed by the court to be fair, reasonable and non-discriminatory (FRAND). The case is noteworthy not least because the threat of an injunction of this sort has become increasingly rare in other jurisdictions, arguably resulting in an imbalance in bargaining power between patent holders and implementers.

Read the full piece here.

Abstract

Owners of standard essential patents (SEPs) are cast as villains for engaging in “patent hold-up,” i.e., taking advantage of the fact that they negotiate royalties with implementer-licensees that already have made sunk investments in the standard. In contrast to “patent ambush,” patent hold-up involves no standard-setting misconduct or harm to any competitive process, and thus cannot violate antitrust law. Commentators taking a contrary positions confuse the ends of antitrust law with its means. Antitrust law promotes consumer welfare only by protecting competition. Casting aside this core principle would expose business decisions, including ordinary price setting, to judicial oversight. Commitments made by SEP owners in the standard-setting process, however, should be enforced, and they are enforced. Without an antitrust cause of action, implementers invoke the powers of the courts to resolve royalty disputes over SEPs.

Summary

We would like to thank you for the opportunity to comment on these important and timely issues. In the preamble to this Notice of Inquiry (“NOI”) the NTIA notes that is responsible for “protecting and promoting an open and interoperable internet, advocating for the free flow of information, and strengthening the global marketplace for American digital products and services.” We agree with the implicit assumption of this statement that it is possible to both promote an open Internet as well as protect the interests of American creators.

With this in mind, we would like to offer some comments on how best to assess the oft-asserted tension between policies that purport to maximize freedom online and those that seek to protect the interests of rightsholders.

It is undeniable that, in some cases, the unfettered flow of information can contribute to the infringement of the intellectual property rights of American citizens and companies, and that this is contrary to NTIA’s mission to promote the marketplace for American digital products and services. But it is also undeniable that the protection of intellectual property rights can promote both the creation of information and its dissemination. Our intellectual property laws reflect the congressional and judicial balancing of these dynamics: There is little reason to think that the legislative and legal principles that determine when content or its distribution is illegal offline apply any less when content is distributed online.

The flow of information is, in fact, never “unfettered.” When considering the free flow of information online, the goal should be the same as it is offline: to increase the flow of legitimate information and to decrease the flow of illegitimate information.

Properly considered, there is no novel conflict between promoting the flow of information and protecting intellectual property rights online. While the specific mechanisms employed to mediate between these two principles may differ — and, indeed, while technological change can alter the distribution of costs and benefits in ways that must be accounted for — the fundamental principles that determine the dividing line between “legal” and “illegal” content and its distribution offline can and should be respected online.

Click here to read the full article.

In an ideal world, it would not be necessary to block websites in order to combat piracy. But we do not live in an ideal world. We live in a world in which enormous amounts of content—from books and software to movies and music—is being distributed illegally. As a result, content creators and owners are being deprived of their rights and of the revenue that would flow from legitimate consumption of that content.

Read the full piece here.

Summary

The relationship between classical liberalism and technology is surprisingly fraught. The common understanding is that technological advance is complementary to the principles of classical liberalism – especially in the case of contemporary, information-age technology. This is most clearly on display in Silicon Valley, with its oft-professed libertarian (classical liberalism’s kissing cousin) affinities. The analytical predicate for this complementarity is that classical liberalism values liberty-enhancing private ordering, and technological advance both is generally facially liberty-enhancing and facilitates private ordering.

This analysis, however, is incomplete. Classical liberalism recognizes that certain rules are necessary in a well-functioning polity. The classical liberal, for instance, recognizes the centrality of enforceable property rights, and the concomitant ability to seek recourse from a third party (the state) when those rights are compromised. Thus, contemporary technological advances may facilitate private transactions – but such transactions may not support private ordering if they also weaken either the property rights necessary to that ordering or the enforceability of those rights.

This chapter argues that technological advance can at times create (or, perhaps more accurately, highlight) a tension within principles of classical liberalism: It can simultaneously enhance liberty, while also undermining the legal rules and institutions necessary for the efficient and just private ordering of interactions in a liberal society. This is an important tension for classical liberals to understand – and one that needs to be, but too rarely is, acknowledged or struggled with. Related, the chapter also identifies and evaluates important fracture lines between prevalent branches of modern libertarianism: those that tend to embrace technological anarchism as maximally liberty-enhancing, on the one hand, and those that more cautiously protect the legal institutions (for example, property rights) upon which individual autonomy and private ordering are based, on the other.

This chapter proceeds in four parts. Part I introduces our understanding of classical liberalism’s core principles: an emphasis on individual liberty; the recognition of a limit to the exercise of liberty when it conflicts with the autonomy of others; and support for a minimal set of rules necessary to coordinate individuals’ exercise of their liberty in autonomy-respecting ways through a system of private ordering. Part II then offers an initial discussion of the relationship between technology and legal institutions and argues that technology is important to classical liberalism insofar as it affects the legal institutions upon which private ordering is based. Part III explores how libertarian philosophies have embraced contemporary technology, focusing on “extreme” and “moderate” views – views that correspond roughly to liberty maximalism and autonomy protectionism. This discussion sets the stage for Part IV, which considers the tensions that technological change – especially the rapid change that characterizes much of recent history – creates within the classical liberal philosophy. The central insight is that classical liberalism posits a set of relatively stable legal institutions as the basis for liberty-enhancing private ordering – institutions that are generally developed through public, not private ordering – but that technology, including otherwise liberty-enhancing technology, can disrupt these institutions in ways that threaten both individual autonomy and the private ordering built upon extant institutions.

The Internet is a modern miracle: from providing all varieties of entertainment, to facilitating life-saving technologies, to keeping us connected with distant loved ones, the scope of the Internet’s contribution to our daily lives is hard to overstate. Moving forward there is undoubtedly much more that we can and will do with the Internet, and part of that innovation will, naturally, require a reconsideration of existing laws and how new Internet-enabled modalities fit into them.

Read the full piece here.

ICLE Associate Director for Innovation recently debated Sasha Moss of the R Street Institution on the nature of copyright law, its constitutional foundations, and the proper contours of its function in the modern economy. Video of the event is embedded below