William & Mary’s Alan Meese has posted a terrific tribute to Robert Bork, who passed away this week.  Most of the major obituaries, Alan observes, have largely ignored the key role
Bork played in rationalizing antitrust, a body of law that veered sharply off course in the middle of the last century.  Indeed, Bork began his 1978 book, The Antitrust Paradox, by comparing the then-prevailing antitrust regime to the sheriff of a frontier town:  “He did not sift the evidence, distinguish between suspects, and solve crimes, but merely walked the main street and every so often pistol-whipped a few people.”  Bork went on to explain how antitrust, if focused on consumer welfare (which equated with allocative efficiency), could be reconceived in a coherent fashion.

It is difficult to overstate the significance of Bork’s book and his earlier writings on which it was based.  Chastened by Bork’s observations, the Supreme Court began correcting its antitrust mistakes in the mid-1970s.  The trend began with the 1977 Sylvania decision, which overruled a precedent making it per se illegal for manufacturers to restrict the territories in which their dealers could operate.  (Manufacturers seeking to enhance sales of their brand may wish to give dealers exclusive sales territories to protect them against “free-riding” on their demand-enhancing customer services; pre-Sylvania precedent made it hard for manufacturers to do this.)  Sylvania was followed by:

• Professional Engineers (1978), which helpfully clarified that antitrust’s theretofore unwieldy “Rule of Reason” must be focused exclusively on competition;
• Broadcast Music, Inc. (1979), which held that competitors’ price-tampering arrangements that reduce costs and enhance output may be legal;
• NCAA (1984), which recognized that trade restraints among competitors may be necessary to create new products and services and thereby made it easier for competitors to enter into output-enhancing joint ventures;
• Khan (1997), which abolished the ludicrous per se rule against maximum resale price maintenance;
• Trinko (2004), which recognized that some monopoly pricing may aid consumers in the long run (by enhancing the incentive to innovate) and narrowly circumscribed the situations in which a firm has a duty to assist its rivals; and
• Leegin (2007), which overruled a 96 year-old precedent declaring minimum resale price maintenance–a practice with numerous potential procompetitive benefits–to be per se illegal.

Bork’s fingerprints are all over these decisions.  Alan’s terrific post discusses several of them and provides further detail on Bork’s influence.

And while you’re checking out Alan’s Bork tribute, take a look at his recent post discussing my musings on the AALS hiring cartel.  Alan observes that AALS’s collusive tendencies reach beyond the lateral hiring context.  Who’d have guessed?

Filed under: antitrust, cartels, law and economics, legal scholarship, markets, monopolization, regulation, resale price maintenance, Supreme Court

As Democrats insist that income taxes on the 1% must go up in the name of fairness, one Democratic Senator wants to make sure that the 1% of heaviest Internet users pay the same price as the rest of us. It’s ironic how confused social justice gets when the Internet’s involved.

Read the full piece here.

You can listen here: http://www.fed-soc.org/publications/detail/is-the-patent-system-working-or-broken-a-discussion-with-judges-posner-and-michel-podcast.

Read the full piece here.

A debate is brewing in Congress over whether to allow the Federal Trade Commission to sidestep decades of antitrust case law and economic theory to define, on its own, when competition becomes “unfair.” Unless Congress cancels the FTC’s blank check, uncertainty about the breadth of the agency’s power will chill innovation, especially in the tech sector. And sadly, there’s no reason to believe that such expansive power will serve consumers.

Read the full piece here.

https://www.youtube.com/watch?v=MK1HsI48hDc

As Democrats insist that income taxes on the 1% must go up in the name of fairness, one Democratic Senator wants to make sure that the 1% of heaviest Internet users pay the same price as the rest of us. It’s ironic how confused social justice gets when the Internet’s involved.

Read the full piece here.

A heavily revised and expanded verison of one of my earlier blog postings was just posted as an op-ed on Forbes.com.  This op-ed addresses how the FTC and DOJ have let themselves become swept up in anti-patent rhetoric, as evidenced by the FTC-DOJ workshop on December 10 that I participated in. Here’s a small taste of the op-ed:

Although the public hears the mantra almost daily that “the patent system is broken,” what we really need is a thorough evaluation of the historic impact the patent system has had on innovation without the negative hype and misinformation that is perpetuated in news headlines or blogs. On December 10, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) held the first of a series of workshops on the patent system and innovation. This first workshop dived into the workings of what some people call “patent assertion entities” (PAE), which are firms that acquire and license patents. The FTC and DOJ, as well as most of the invited participants at the workshop, adopted the “PAE” label as the subject of their critical scrutiny.

 Of course, identifying these firms by their business model of patent licensing denies the patent system naysayers the pejorative rhetorical force of their “PAE” label.  In fact, patent licensing firms have come under attack in newspaper reports, in blogs, and in academic commentary, prompting the FTC and DOJ to consider whether to sanction patent licensing firms for allegedly undermining the innovation made possible by the patent system through some nebulous notion that patent licensing is somehow “anti-competitive.” If anything, this reveals the power of rhetoric.

The truth is that these patent licensing firms maximize value in patented innovation, proving once again Adam Smith’s classic economic insight that specialization and division of labor is key to the success of a commercial economy. There has always existed since the early nineteenth century a secondary market in the sale and purchase of patents, but these firms make use of modern developments in corporate law, finance, and technology to reap new value for inventors or other firms who lack either the knowledge or resources to monetize their innovation assets. In short, patent licensing firms reflect the exact same value-maximizing aggregation and specialization that other firms have long employed in our successful invention economy, such as when 3M or Thomas Edison’s Menlo Park Laboratory aggregated inventors for research and development itself. Patent licensing firms, by better enabling inventors to sell and exchange their ideas, bring the same efficiencies to our invention economy as did the invention of R&D departments over one hundred years ago.

As the blogging master (Instapundit) likes to say: Read the whole thing!

Filed under: antitrust, doj, federal trade commission, intellectual property, licensing, patent

When the Coca-Cola Company decided to release New Coke in 1985, it failed to heed the classic adage, “if it ain’t broke, don’t fix it.” Coke abandoned a product that had produced exceptional results for it, and much happiness for consumers, only to revert back after the mistake was made and millions of dollars were needlessly wasted.  The venerable patent system in the United   States is in danger of succumbing to the same fate.

Read the full piece here.

Now that the election is over, the Federal Communications Commission is returning to the important but painfully slow business of updating its spectrum management policies for the 21st century. That includes a process the agency started in September to formalize its dangerously unstructured role in reviewing mergers and other large transactions in the communications industry.

Read the full piece here.