The New York Times set hearts aflutter in the IP world yesterday with its hit piece on patents in the high-tech industry– I’m shocked, shocked to find the New York Times publishing biased articles on hot topics in politics and law — but Bloomberg also published an important article yesterday on the smart phone war, software patents and other topics raised by today’s so-called patent litigation crisis: Apple Phone Patent War Like Sewing Machine Minus Violence.

Read the full piece here. 

This coming Friday (Oct. 12), the Center for Business Law and Regulation at Case Western Law School will host what promises to be a terrific symposium on executive compensation.  Presenters include TOTM alumnus Todd Henderson (Chicago Law), Jill Fisch (Penn Law), Jesse Fried (Harvard Law), David Walker (Boston U Law), David Larcker (Stanford Business), Stephen L. Brown (TIAA-CREF), Paul Hodgson (GMI Ratings), William Mulligan (Primus Venture Partners).

Here’s a description of the symposium:

Executive compensation has become the most contentious issue in corporate governance. Many claim that poorly designed executive compensation helped cause the recent financial collapse, but critics disagree widely about what was wrong with those designs. Management and investors are wrestling over their roles in structuring executive compensation through say-on-pay and over the role of proxy advisory services. The symposium brings together prominent practicing attorneys, institutional investors, proxy advisors, and academics to discuss the current issues and where we are, or should be, headed.

If you’re in Cleveland and able to make it to the symposium (for which 4.5 hours of CLE is available), do it.  Otherwise, check out the webcast.

Filed under: announcements, executive compensation

https://www.youtube.com/watch?v=2KdLW4T5iCY

At today’s Open Commission Meeting, the FCC is set to consider two apparently forthcoming Notices of Proposed Rulemaking that will shape the mobile broadband sector for years to come.  It’s not hyperbole to say that the FCC’s approach to the two issues at hand — the design of spectrum auctions and the definition of the FCC’s spectrum screen — can make or break wireless broadband in this country.  The FCC stands at a crossroads with respect to its role in this future, and it’s not clear that it will choose wisely.

Read the full piece here.

I will be speaking at a lunch debate in DC hosted by TechFreedom on Friday, September 28, 2012, to discuss the FTC’s antitrust investigation of Google. Details below.

TechFreedom will host a livestreamed, parliamentary-style lunch debate on Friday September 28, 2012, to discuss the FTC’s antitrust investigation of Google.   As the company has evolved, expanding outward from its core search engine product, it has come into competition with a range of other firms and established business models. This has, in turn, caused antitrust regulators to investigate Google’s conduct, essentially questioning whether the company’s success obligates it to treat competitors neutrally. James Cooper, Director of Research and Policy for the Law and Economics Center at George Mason University School of Law, will moderate a panel of four distinguished commenters to discuss the question, “Should the FTC Sue Google Over Search?”  

Arguing “Yes” will be:

• Eric Clemons
  • Professor of Operations and Information Management at the Wharton School of the University of Pennsylvania and author of “The Need to Focus on the Correct Issues in Google, Power and Antitrust”
• Allen Grunes
  • Attorney at Brownstein Hyatt Farber Schreck and author of “Is There a Basis in Antitrust Law for Requiring ‘Neutral’ Search Results?“

Arguing “No” will be:

• Glenn Manishin
  • Partner at Troutman Sanders and author of “No Need for Antitrust Prosecution of Google“
• Geoffrey Manne
  • Lecturer in Law at Lewis & Clark Law School, Executive Director of the International Center for Law & Economics and author of “If Search Neutrality Is the Answer, What’s the Question?“

When:
Friday, September 28, 2012
12:00 p.m. – 2:00 p.m.

Where:
The Monocle Restaurant
107 D Street Northeast
Washington, DC 20002

RSVP here. The event will be livestreamed here and you can follow the conversation on Twitter at #GoogleFTC.

For those viewing by livestream, we will watch for questions posted to Twitter at the #GoogleFTC hashtag and endeavor, as possible, to incorporate them into the debate.

Questions?
Email [email protected]

Filed under: announcements, antitrust, google Tagged: Allen Grunes, Eric Clemons, Federal Trade Commission, ftc, FTC Act, Glenn Manishin, google, James Cooper, search, search neutrality, Section 2, section 5, Sherman Act, techfreedom

Disputes over intellectual property rights permeate our culture. The music and movie industries have brought thousands of copyright infringement lawsuits against users of peer-to-peer systems like BitTorrent. YouTube videos and Facebook postings are regularly taken down because they contain infringing content. Earlier this year, proposed copyright legislation, the Stop Online Piracy Act, was effectively killed by a grassroots uprising on the Internet. After the Internet Blackout Day on Jan. 18, SOPA became the new four-letter word.

Read the full piece here.

My paper with Judge Douglas H. Ginsburg (D.C. Circuit; NYU Law), Behavioral Law & Economics: Its Origins, Fatal Flaws, and Implications for Liberty, is posted to SSRN and now published in the Northwestern Law Review.

Here is the abstract:

Behavioral economics combines economics and psychology to produce a body of evidence that individual choice behavior departs from that predicted by neoclassical economics in a number of decision-making situations. Emerging close on the heels of behavioral economics over the past thirty years has been the “behavioral law and economics” movement and its philosophical foundation — so-called “libertarian paternalism.” Even the least paternalistic version of behavioral law and economics makes two central claims about government regulation of seemingly irrational behavior: (1) the behavioral regulatory approach, by manipulating the way in which choices are framed for consumers, will increase welfare as measured by each individual’s own preferences and (2) a central planner can and will implement the behavioral law and economics policy program in a manner that respects liberty and does not limit the choices available to individuals. This Article draws attention to the second and less scrutinized of the behaviorists’ claims, viz., that behavioral law and economics poses no significant threat to liberty and individual autonomy. The behaviorists’ libertarian claims fail on their own terms. So long as behavioral law and economics continues to ignore the value to economic welfare and individual liberty of leaving individuals the freedom to choose and hence to err in making important decisions, “libertarian paternalism” will not only fail to fulfill its promise of increasing welfare while doing no harm to liberty, it will pose a significant risk of reducing both.

Download here.

 

Filed under: behavioral economics, behavioral economics, consumer financial protection bureau, consumer protection, economics, free to choose, Hayek, law and economics

There are a lot of inaccurate claims – and bad economics – swirling around the Universal Music Group (UMG)/EMI merger, currently under review by the US Federal Trade Commission and the European Commission (and approved by regulators in several other jurisdictions including, most recently, Australia). Regulators and industry watchers should be skeptical of analyses that rely on outmoded antitrust thinking and are out of touch with the real dynamics of the music industry.

The primary claim of critics such as the American Antitrust Institute and Public Knowledgeis that this merger would result in an over-concentrated music market and create a “super-major” that could constrain output, raise prices and thwart online distribution channels, thus harming consumers. But this claim, based on a stylized, theoretical economic model, is far too simplistic and ignores the market’s commercial realities, the labels’ self-interest and the merger’s manifest benefits to artists and consumers.

For market concentration to raise serious antitrust issues, products have to be substitutes. This is in fact what critics argue: that if UMG raised prices now it would be undercut by EMI and lose sales, but that if the merger goes through, EMI will no longer constrain UMG’s pricing power. However, the vast majority of EMI’s music is not a substitute for UMG’s. In the real world, there simply isn’t much price competition across music labels or among the artists and songs they distribute. Their catalogs are not interchangeable, and there is so much heterogeneity among consumers and artists (“product differentiation,” in antitrust lingo) that relative prices are a trivial factor in consumption decisions: No one decides to buy more Lady Gaga albums because the Grateful Dead’s are too expensive. The two are not substitutes, and assessing competitive effects as if they are, simply because they are both “popular music,” is not instructive.

Given these factors, a larger catalog won’t lead to abuse of market power. This is precisely why the European Union cleared the Sony/EMI music publishing merger, concluding that “Customers usually select a song or certain musical works and not a [label] or a [label’s] catalog… In the event that a customer is wedded to a particular song…or a catalog of songs…, even a small [label] would have pricing power over these particular musical works. The merger would not affect this situation (since the size of the catalog does not matter).”

A second popular criticism is that a combined UMG/EMI would control 51 of 2011’s Billboard Hot 100 songs. But this assertion ignores the ever-changing nature of musical output and consumer tastes – not to mention that “top-selling songs of 2011” is hardly a relevant antitrust market (and neither is “top-selling songs of the last 10 years”). A label’s ownership of 51 songs that were popular in 2011 is not suggestive of its ability to price its full catalog of several million songs in negotiations with an online music service. Meanwhile, by other measures (this year independent artists garnered over 50% of Grammy nominations and won 44% of the awards) the major labels are hardly the only purveyors of valuable songs, and competition from Indie labels and artists is significant.

Edgar Bronfman, a director and former CEO and chairman of Warner Music Group, recently testified in Congress against the merger, arguing that a combined UMG/EMI could decide “what digital services live and what digital services die.” But Bronfman himself has elsewhere acknowledged that labels can’t prosper if they can’t sell their music. As chairman of Universal in 2001 he told Congress that, “for us to effectively market and distribute…albums, they are going to have to be on as many different online music sites as possible…. Frankly, if we lock away our catalog, we aren’t generating value for our artists or our shareholders or our fans.” As a competitor of UMG, Bronfman may have changed his tune, but his earlier point is even more true today with digital sales exceeding 50% of the market.

Far from wanting to constrain supply or hamstring distribution channels, labels have an incentive to make music widely and easily accessible. In fact, power buyers like Apple may have greater control over the marketplace than the labels. As UMG’s CEO Lucian Grainge bluntly noted, “[i]f Apple stops selling our music, we go out of business. Apple does not.” Critics downplay the role of power buyers in disciplining prices, but that assertion goes against the evidence.

Dismissive attitudes about piracy as a constraint on prices also miss the mark. For many consumers, a marginal price increase will indeed induce some piracy. More positively, the opposite also holds true: Increased consumer access to inexpensive and accessible legal content reduce piracy. Given the ravages of pirated music since Napster, it’s no wonder that labels – including both Universal and EMI – are now licensing their music to so many legal digital music services like Spotify. UMG’s incentives to continue to do so can only increase following the merger.

Finally, antitrust reviews must consider the benefits of the merger. Bringing together Universal and EMI could create substantial operating efficiencies. More efficient A&R and production should benefit artists (and fans) directly. And with a larger catalog UMG’s opportunities for pairing similar artists for marketing and concert promotion would increase, helping new and less-popular artists reach larger audiences. And UMG is in a position to breathe new life into EMI’s catalog with investment in human capital and artists’ careers that EMI simply can’t muster.

Claims of this merger‘s anticompetitive effects are not supported either by antitrust analysis or the realities of this market. Regulators should let the music play.

Cross-posted from Forbes

I respect Alex Tabarrok immensely, but his recent post on the relationship between “patent strength” and innovation is, while pretty, pretty silly. The entirety of the post is the picture I have pasted here.

Read the full piece here.